On October 20, as a part of Parliamentary hearings, the Chairman of the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market (hereinafter referred to as the Agency) Madina Abylkasymova spoke about the Agency’s measures to reduce debt burden and increase financial literacy of the population.
As the head of the financial regulator noted, the level of loans overdue by more than 90 days from banks is 5.2% or 0.5 trillion tenge. The number of borrowers with overdue loans amounted to 516 thousand people or 7% of the total number of borrowers. In the microfinance sector, the number of borrowers with overdue payments of more than 90 days is 347 thousand people for a total amount of 98 billion tenge.
The Agency is implementing a set of measures, in order to limit the excessive growth of citizens’ debt burden and minimize risks in consumer lending.
The first priority is to limit the aggressive issuance of consumer loans by banks and MFOs. The average debt on unsecured consumer loans has increased from 913 thousand tenge to 1 million tenge since the beginning of the year.
The Agency proposes to introduce at the legislative level a restriction on the maximum amount of a consumer loan, reducing the excessive growth of consumer loans. In addition, to limit the issuance of consumer loans for large amounts, increased risk-weighting coefficients will be established.
The second area is to ensure proper assessment of the credit worthiness of borrowers. One of the main problems is issuing loans to citizens without appropriate income.
In this regard, since 2020 year, a requirement has been introduced for banks and MFOs to calculate the borrower’s debt burden ratio (DLR). KDN limited the borrower’s monthly payments on all loans to 50% of his income.
Based on the results of supervisory activities, the Agency additionally plans to exclude 4 of the currently relevant 12 income criteria, that do not reflect the borrower’s regular income: utility costs, purchases in an online store, the presence of property and the amount of cash balances on deposit.
Also, the requirements for calculating the CIT will be extended to all borrowers and all loans to individuals. To limit the issuance of loans to citizens under 21 years of age, loans will be issued after confirmation of official income.
The third key area is to limit the excessive growth of the online microcredit segment. Today, the volume of online microloans is 197 billion tenge, the number of borrowers has reached 1.09 million people, of which 297 thousand people have problematic microloans in the amount of 37 billion tenge.
The Agency has initiated the issue of excluding a special type of microloan for a period of up to 45 days and an amount of up to 50 MCI, as well as establishing a single annual effective interest rate for all microloans. Online microcredit companies will be able to issue microloans for any period at a single interest rate for all microfinance organizations.
To clear the market of unscrupulous entities unable to comply with legal requirements for the minimum equity capital of online microcredit companies were increased from 100 million tenge to 200 million tenge from January 1, 2024. It is planned to further gradually increase the minimum equity capital requirements.
The fourth priority for reducing debt is to create conditions for citizens to restructure problem debt.
As a part of the mandatory procedure for pre-trial settlement of problem debt, which has been in effect since 2021 year, individual plans were requested from banks and microfinance organizations to reduce problem loans of the population, which were updated this year. As a part of the plans, by the end of 2024 year, 1.45 million borrowers with a debt amount of 275 billion tenge will be covered.
Reducing the debt burden of borrowers in arrears, from January 1, 2020 year, a legislative ban was introduced on the accrual of penalties and commissions on consumer loans and microloans to individuals after 90 days of delay, and from the beginning of 2022 year, a ban was introduced on the accrual of interest on new loans. The Agency has developed legislative amendments to introduce a ban on all existing, including previously concluded consumer loans.
The fifth direction is regulation of the activities of collection organizations. The key measure is constant work to cleanse the market of unscrupulous entities. Banks and microfinance organizations are actively selling personal loans to collection agencies at a significant discount. In turn, collectors collect the entire amount of the debt without restructuring the debt.
In this regard, in accordance with the Decree of the Head of State, it is proposed to introduce a ban on the sale of consumer bank loans and microloans of citizens to collection agencies.
The introduction of these restrictions does not mean a complete stop of the collection market. Collectors will be able to continue collecting problem loans without purchasing them. Financial institutions will have these loans, and they will be responsible for dealing with problem debtors. In addition, collectors will be able to serve as service companies for managing stressed assets of individual entrepreneurs and legal entities.
In order to protect the rights of mortgage borrowers, the sixth direction introduces a ban on the eviction of families with minor children from their only home during the heating season. Additionally, banks are given the opportunity to rent out housing that has become the bank’s property as a result of foreclosure. To ensure borrowers have access to money for urgent needs, it is proposed to provide protection against collection of the balance of money in the borrower’s account in the amount of one minimum wage.
To strengthen the protection of military personnel, it is planned to introduce a mandatory deferment on loans for the entire period of compulsory military service without accrual of remuneration on them.
In order to improve the mechanism for resolving disputes between consumers and financial organizations, it is proposed to expand the powers of the banking Ombudsman institution to consider disputes regarding all loans from citizens.
The seventh area is combating financial fraud. To protect citizens from fictitious microloans, in 2022 year, a requirement was introduced to stop claims work and suspend the accrual of remuneration on all fraudulent loans.
A serious issue is compensation for damage from the illegal actions of financial fraudsters. In this regard, the Agency, together with interested government bodies, has developed a set of legislative measures aimed at solving these problems, including strengthening the requirements for cybersecurity of mobile applications and information systems of banks and MFOs, creating a unified Antifraud Center jointly with the National Bank, introducing voluntary refusal of citizens to obtaining loans, introducing at the legislative level the responsibility of a financial organization to compensate for damage or terminate claims against a client for fraudulent transactions carried out in violation of information security procedures, as well as the liability of cellular operators for the use of anonymous telephone numbers, substitution and transfer of subscriber numbers to third parties.
To protect consumer rights at the systemic level, legislative amendments will be developed to give the Agency the authority to limit the provision of financial products that do not meet the interests of the consumer.
Also one of the priority areas is increasing the financial literacy of the population. In pursuance of the instructions of the Head of State, the Agency, together with the AMANAT party, is working to expand the Karyzsyz Kogam project to all regions of the country; financial organizations will take an active part in this project.