“We hand out money” reads an advert for easy credit in Moscow, October 2017. Photo (c): Maxim Blinov / RIA Novosti. All rights reserved.
“Avoid multiple loans. With several loans you are at greater risk of over-indebtedness,” warns the Warsaw-based Microfinance Center in a recent education campaign directed at users of microcredits in Eastern Europe, South Caucasus and Central Asia.
Russia is rarely referred to when discussing modern microfinance, but here the business of old-school moneylenders has thrived for several years. The warning not to take multiple loans could be addressed precisely to clients of Russian payday lenders and loansharks. Companies usually offer loans from 1,000 to 5,000 roubles (£12-£62), and charge 732% per annum. Some of them have loans of tens of thousands of roubles available. With such enormous interest rates, clients of moneylenders often have difficulties repaying these apparently harmless sums. Taking one loan to pay back another or even incurring several loans from different organisations is a common strategy to deal with this. A typical borrower is likely to fall into a debt trap and become insolvent.
