Financial services of business entities, their tasks and functions

Fig.5. Microfinance Outreach and Financial Penetration

The average size of microloans reduced from SUM5.3 to SUM4.5 million ( equivalent to $662−$562) due to the growth of outreach in rural areas, while the average size of microcredits and microleasing increased by around 1.5 times from 2016 to 2017, which resulted in the increase of MCOs’ capital and encouraged interest from small businesses (see Figure 6). MCOs are credit-only institutions that are not allowed to mobilize deposits or borrow from the general public, thus they pose no systemiс risks for the financial system. MCO regulations focus heavily on prudential requirements, which seems excessive for these institutions. Similarly to banks, borrower requirements to access MCO microfinance products seem overly burdensome (in particular, collateral requirements similar to bank loans). Like banks, MCOs are limited in issuing cash-flow-based and uncollateralized microcredits—the features that are key for traditional microlending. It is an unlevel playing field—MCOs do not enjoy any of the benefits accorded to banks engaged in the provision of microfinance services (such as access to government funding and tax exemptions on microfinance activities with a social focus).