Kazakhstanis Trapped in Debt: Violations Found Among MFIs
Photo: Elements.envato.com, ill. purposes
The Financial Monitoring Agency (FMA) has uncovered serious violations committed by six microfinance organizations (MFIs), which allegedly drove thousands of Kazakhstanis into debt bondage, forcing them to repay loans several times over, Orda.kz reports.
According to the Agency, an investigation is underway in Almaty into fraud and illegal business practices involving the leadership of the following MFIs:
- Creditum
- Sofi Finance
- Hava Finance
- SF Offline
- POS Credit
- Salem Credit
The FMA revealed that these companies targeted clients with overdue loans, coercing them into signing guarantee agreements with affiliated firms via three online platforms.
Under these agreements, the guarantor would only cover the debt in the event of the borrower’s death.
“For this so-called 'service,' borrowers were charged fees many times greater than their original loan amount — effectively locking them in a debt trap,” the agency stated. “In many cases, borrowers ended up paying three to five times more than they initially owed.”
In one example, a client with a 120,000 tenge overdue loan ended up transferring 446 thousand tenge to the MFI under a fictitious "guarantee" (not counting the principal debt and interest).
These practices became the main source of profit for the six MFIs, generating around 30 billion tenge in illegal earnings, according to investigators.
In early March, Kazakhstan introduced new regulations for collection agencies, aiming to curb abusive practices in the financial sector.
Original Author: Nikita Drobny
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