Government Seeks to Support Microfinance in Russia

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Feb 2009
Washington, United States, February, 17 2009 - The Ministry of Economic Development proposed a mechanism to distribute 30 billion rubles (around US$830 million) allocated for state support of SMEs and microfinance. Of this amount, 1 billion rubles (US$28 million) is intended specifically for microfinance.

At a meeting last month, the Russian Government Committee on SME development discussed its concern about the decrease in bank lending to SMEs in the second half of 2008. This decrease in lending (and indeed in demand for loans) was apparently in response to the unfolding economic crisis, compounded by an increase in interest rates and stricter—and often unjustified—requirements of banks to their SME clients. The Central Bank suggested changing some of the instructions on SME loans classification on banks’ books and reducing reserve requirements on SME loans, by way of providing incentives to banks to lend to SMEs. The Ministry of Economic Development proposed a mechanism to distribute 30 billion rubles (around US$830 million) allocated for state support of SMEs and microfinance. Of this amount, 1 billion rubles (US$28 million) is intended specifically for microfinance.

Last week I attended a meeting at the Chamber of Commerce, where the Ministry of Economic Development presented its preliminary plan for using the US$28 million to support microfinance. Regional authorities are expected to provide at least 30% of matching contributions, which would help to establish a few wholesale lending facilities that would fund MFIs and financial co-ops. Pilots would most likely take place in Moscow, St. Petersburg, and Tatarstan. Some funds would go to developing microfinance infrastructure  (subsidies for ratings, training, etc.) and may also be used for interest rate subsidies on commercial banks’ loans to MFIs.

The Russian Development Bank also plans to help with funding to MFIs and co-ops by lending 2–5 billion rubles (US$56 million to US$140 million). It announced plans to start this program in about two months.

The Russian Microfinance Center participated in the first meeting and had a leading role in organizing the second one. While the Ministry of Economic Development program is still being developed, RMC, in consultation with CGAP, is working on providing inputs in its design.



 

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