Illustration: AI
In Kazakhstan, 99 microfinance organizations (MFOs) and 13 credit partnerships have lost their licenses over three years. Losing a license does not in itself wipe out customers’ debts, LS reports, citing the Agency for Regulation and Development of the Financial Market (lsm.kz).
What happened
In nearly 40 cases, licenses were forcibly revoked. The regulator cited repeated legal violations, failure to comply with its orders and failure to start operating after receiving a license.
16 MFOs and five credit partnerships lost their licenses for repeated violations. This means three or more violations within 12 consecutive calendar months.
Another four MFOs and two credit partnerships repeatedly failed to comply with the regulator’s written orders. Ten MFOs and two partnerships lost their licenses because they had not begun operating within six months of receiving them.
What this means for borrowers
Here’s an important detail: an MFO losing its license does not release customers from their obligations. The debt may be transferred to another organization.
“Borrowers’ obligations remain in place,” the agency said.
If an MFO is reorganized, the right to collect repayment of a microloan may pass to its legal successor. Another option is to assign the debt to a new creditor. These claims can only be transferred to organizations in categories specified by law.
How borrowers will be told about a new creditor
The regulator listed second-tier banks, debt collection agencies, other MFOs and special finance companies as possible recipients of the debt.
If an MFO assigns its claim, it must notify the borrower within 30 calendar days of signing the agreement. The notice must identify the new creditor or servicing company and provide the details needed to make future payments.
Customers must also be told the scope of the rights transferred and receive a breakdown of the debt. The principal, interest, fees and penalties must be listed separately. These details must be included in the debt transfer notice.
