E-Bulletin, October 2006

Round Table: Prospects of Cooperation in the Area of Microfinance between Russia and Asia-Pacific Countries.

On 16 October 2006 in President Hotel, a round table was held to discuss "Prospects of Cooperation in the Area of Microfinance between Russia and Asia-Pacific Countries." The round table was organized by the Russian Microfinance Center and the National Partnership of Microfinance Market Stakeholders (NAMMS). The discussion was chaired by Mikhail Mamuta, President of the National Association of Microfinance Market Stakeholders and Director of the Russian Microfinance Center.

NAMMS invited leaders of the Asia-Pacific Rural and Agricultural Credit Association to attend the round table. A number of guest speakers presented their institutions and activities, including Benedicto S. Bayaua, Secretary General of Asia-Pacific Rural and Agricultural Credit Association, Jose S. Almario, Department of Finance Director, and Jovita M. Corpuz, CENTRAB President, who spoke about the Council's activity in the area of agricultural credit policies.

RMC Director Mikhail Mamuta presented an overview of the Russian Microfinance Sector. Mikhail Nikolayev, Deputy Chair of the Federation Council and President of the "Eastern Dimension" Public Movement made a presentation on the Federation Council's efforts to promote credit cooperatives.

On the Russian side, presenters included Yuri Volokhonsky, President, National Union of Non-Profit Organizations for Mutual Financial Assistance, and Vladimir Pakhomov, General Director, Foundation for the Development of Rural Credit Cooperatives.

The round table participants discussed various aspects of microfinance and agricultural credits in Russia and Asia-Pacific countries, and prospects of cooperation between Russia and Asia Pacific region. The participants agreed on further mutually beneficial cooperation.

Round Table on Referee Courts

On 17 October 2006 , a round table was organized in Holiday Inn - Sokolniky Hotel in Moscow to discuss the feasibility and prospects of setting up a referee court affiliated with the National Partnership of Microfinance Market Stakeholders (NAMMS). Expert panelists and presenters included: Leonid Balayan, Chairman, Referee Court of the Association of Russian Banks; Victoria Tagirova, Chair of the Board, "Opportunities for All" NGO; Yelena Lomakina, Lawyer, Voronezh SME Support Fund; Olga Churakova, Lawyer, Russian Microfinance Center, who chaired the discussion. RMC Legal Advisor Anna Baitenova also participated in the round table on behalf of the Russian Microfinance Center.

The participants discussed whether it is possible and feasible for NAMMS to set up a Referee Court. At RMC's request, Leonid Balayan made a presentation entitled Advantages and Limitations of Alternative Proceedings in Russia: Feasibility and Methods of Establishing Referee Courts in the Microfinance Sector.

As a result of the discussion, the round table participants agreed that alternative proceedings as such have good prospects; they also noted that the establishment of referee courts attached to regional associations and unions may be positive and useful, whereas a referee court affiliated with NAMMS would be premature, because it will be impossible in the near future to determine the types of parties taking their disputes to such a court.

The round table memorandum and Leonid Balayan's presentation can be found at: http://www.rmcenter.ru/art.php?catId=5&artId=1014&lng=1.

Advisory Group Meeting to Discuss the Draft Federal Law on Microfinance Institutions

On 17 October 2006, the advisory Expert Group met in Moscow to discuss a draft Concept of the Federal Law on Microfinance Institutions prepared by the Russian Ministry of Finance.

Representatives of the Russian Microfinance Center attended the round table, including Director Mikhail Mamuta, legal advisor Anna Baitenova, and lawyer Olga Churakova.

NAMMS President Mikhail Mamuta stressed that a law on microfinance institutions should meet the needs of the Russian Federation; it should be consistent with Russia's position in the world, and take into account international best practices, given that microfinance legislation has been adopted in more than a hundred countries. This law should also contain clear definitions and ensure transparency of microfinance activity - therefore it is proposed that commercial MFIs should be regulated. The law should also provide for incentives to enable the government promote microfinance. Currently, MFI operations are regulated by the Civil Code, and a new law is expected to facilitate their further development.

Specific forms, methods and mechanisms of state support of microfinance can and should be defined at the regional level by regional SME support programs. Such measures may include interest rate subsidies, credit guarantees provided by the regional government, and other measures.

A detailed report of the meeting can be accessed from RMC website at http://www.rmcenter.ru/art.php?catId=5&artId=1016&lng=1.

Meeting on Promoting Credit Cooperatives and Their Contribution to SME Lending in Volgograd

On 18 October 2006, a meeting on the Role of Credit Cooperatives in SME Finance was held in Volgograd to mark the International Day of Credit Unions and 175th anniversary of cooperatives in Russia. The meeting was attended by top executives of Volgograd-based associations of rural and urban credit cooperatives, including Gennady Nikulin, Yelena Tokareva, Alexander Norov, and also Deputy Chair of the Federation Council Mikhail Nikolayev and RMC Director Mikhail Mamuta.

The speakers highlighted problems as well as achievements of credit cooperatives. A central issue addressed by the meeting was the need to improve regulation of credit cooperatives to protect their members/shareholders and to increase sustainability of the system. Better regulation is also needed to encourage cooperatives to increase their share of lending to SME, which is considered riskier than consumer lending.

Deputy Head of Volgograd Oblast Administration Alexander Plotnikov proposed that the Oblast may serve as a pilot region for introducing a system of streamlined, less onerous credit cooperative regulation, which may be subsequently replicated elsewhere in Russia. Mikhail Mamuta supported the proposal noting that the Oblast, in addition to accumulating capital, will also face important risks, which is recognized by both the Oblast administration and the managers of credit cooperatives. Introducing a transparent regulatory system which matches the risks involved and relies to a large extent on self-regulation is a necessary element of risk management and minimization.

In his concluding presentation, Mikhail Nikolayev summarized the outcomes of the meeting. He noted that the development of cooperatives is of key importance for improving people's wellbeing and increasing prosperity, especially with regard to low-income population. Credit cooperatives should expand their services beyond lending and savings to meet other needs of their members.

Round Table Hosted by the Federation Council to Discuss Legal Regulation of Microfinance

On 26 October 2006, the Federation Council Committee on Financial Markets and Monetary Circulation and the National Association of Microfinance Market Stakeholders (NAMMS) co-organized a round table to discuss ways to improve legal regulation of microfinance. The round table was attended by members of the Russian Parliament, officials of federal ministries and government departments, representatives of banking and microfinance communities.

The discussion was co-facilitated by Sergey Vassilyev, Chairman of the Federation Council Committee for Financial Markets, Monetary and Credit Circulation, and NAMMS President Mikhail Mamuta. The Round Table, organized with methodological support from CGAP, featured presentations by Vice President of the Association of Russian Banks Andrei Yemelin, Advisor to the State Duma Committee on Credit Institutions and Financial Markets Oleg Ivanov, CGAP Advisor Monika Arutyunyan, Deputy Director of the Ministry of Finance Department Vladimir Lukov, Vice President of the "Russia" Association Alexander Lopukhin, and some other presenters.

The participants discussed basic principles of legal regulation and supervision in the sphere of microfinance and the experience of applying such legislation in different countries, and exchanged their opinions on the presented concept of the draft law on microfinance. They argued that the Bank of Russia should relax its requirements concerning the registration and operation of non-bank deposit-credit institutions. Specialists called for further development of the banking legislation, for removing administrative barriers hindering the operation of microfinance institutions in the regions, and for designing a system of regulation and promotion to support this financial instrument.

Training News

Training "Legal Foundations of Microfinance Activity"

Between 4 and 6 October 2006, a course in Legal Foundations of Microfinance Activity was held in Moscow. The participants discussed legal regulation of microfinance in Russia and specifics of microfinance operations by organizations of different charter types, as well as future prospects of microfinance legislation. The participants studied some key legal agreements required for microfinance institutions, such as a loan agreement, a guarantee agreement, and a collateral agreement. They discussed types of jurisdiction, debt collection though commercial [arbitration] court, general court, and referee court proceedings, and also addressed cooperation with credit bureaus and debt collection agencies. The participants found the content extremely relevant and valuable, and highly appreciated the trainers' performance.

Please, contact Yelena Zakarzhevskaya, RMC Training Coordinator, at ezakarzhevskaya@rmcenter.ru about enrolling in RMC training courses.

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