Borrowers seeking financial aid from microfinance institutions.
Revised Article:
Get the scoop on the debts microfinance organizations will be forgiving or restructuring by the end of this year!
According to the Agency for Regulation and Development of the Financial Market, a jaw-dropping 432,000 borrowers will see some relief in their problematic debts, totaling an eye-popping 33.1 billion tenge. Not only that, but around 107,000 of these borrowers will be partially forgiven a total of 800 million tenge, and an additional 28,000 will be completely off the hook for a whopping 600 million tenge.
You might be wondering, who qualifies for this debt relief? Well, the financial regulator explains that these insolvent debtors took unsecured consumer loans from 30 MFIs and approached the organizations for help. After reviewing each borrower's financial situation, income level, social status, and living conditions, individual debt reduction plans were drawn up.
MFIs have the right to restructure troubled debt unilaterally, and if they do decide to forgive part or all of a borrower's debt, provisions are made to cover their losses. This info will be reflected in the borrower's credit history.
On a side note, the legislative procedure for settling credit debt out-of-court was introduced last year. Essentially, banks and MFIs must notify borrowers of any overdue payments within 20 days, and debtors must reach out for loan restructuring within 30 days. In the application, they must explain the reason for the overdue payment, propose restructuring options, and provide supporting documents.
Looking at the bigger picture, it's worth knowing that out of Kazakhstan's 6.8 million loan recipients, a staggering 1.5 million have payment arrears, with 25% of them being clients of microfinance organizations, which typically issue online loans. Some question whether the forthcoming law on the bankruptcy of physical persons will solve the problem. To find out more, check out our video.
Want to know more?
- Could further restrictions on online lending push MFIs into the shadows?
- A whopping 10% of microloans in Kazakhstan are unrecoverable!
- Are microloans a threat to financial stability?
- Bankruptcy law: helping people, not banks, and how to wipe your slate clean.
Additional Insights:
- The growth of Islamic finance in Kazakhstan, along with Kyrgyzstan, is expected to lead the region in the medium-to-long term. This could influence the variety and structure of debt instruments and restructuring options, though specifics for 2022 aren't provided[3].
- Debt restructuring generally involves negotiations on terms, repayment period extensions, and, in some cases, partial or full debt forgiveness[2].
- IMF and World Bank reports often discuss public finance, including consolidation and restructuring, but lack specific details about microfinance institutions or borrowers in Kazakhstan for the given period[4][5].
- The growth of Islamic finance in Kazakhstan and Kyrgyzstan could potentially change the landscape of debt instruments and restructuring options for the microfinance industry and borrowers.
- In the realm of personal-finance, the financially troubled debtors who have taken unsecured consumer loans from microfinance institutions may benefit from debt restructuring or partial or complete debt forgiveness, based on their individual debt reduction plans.
