Overview of Microfinance in Russia

'Microfinance' is a mechanism of financial support for small businesses, providing small loans to businesses that have limited access to traditional sources of financing. The growth of small business is key to Russia's long-term economic development, and the Russian microfinance sector plays an essential role in this development. Because the microfinance market in Russia is constantly changing and developing, it is difficult to give a definitive assessment of the share of the market held by existing microfinance institutions (MFIs), but it is clear that the industry is currently in a period of dynamic growth.

According to data from the Small Business Resource Center, of the 6 million registered small businesses, approximately 2.5 million are in need of micro-credit. The estimated size of the microfinance market of individual entrepreneurs and companies (not taking into account consumer loans) is approximately US$4 billion. Existing microfinance institutions, however, are meeting only 5% of the existing demand.
There are four main types of organizations active on the microfinance market in Russia:

• Credit cooperatives,
• Regional and municipal support funds for small businesses,
• Private support funds for small businesses and international microfinance institutions,
• Specialized banks.

In recent years potential market participants, government representatives, and the business community have taken a growing interest in the microfinance industry in the Russian Federation. This growing interest partially can be attributed to the fact that MFIs hold several significant advantages over traditional financial institutions. These advantages include:

• Simplified reporting and documentation requirements,
• Non-traditional forms of loans (solidarity guarantee, group lending, etc.),
• Comparatively accessible financial resources and convenient services.

The Russian Microfinance Center's objective is to assist in the development of the microfinance industry in Russia by supporting existing and developing microfinance institutions. The Russian Microfinance Center, together with its partner organizations, is working to create a unified support infrastructure for various organizational and legal forms of MFIs.