CITIZENS SINKING IN “QUICK LOANS”: INDEBTING INCREASED 170 PERCENT IN TWO YEARS
- The amount of approved “quick loans” has tripled in two years
- Owners behind the fastest growing financial companies that place the famous quick loans are mostly companies from Bulgaria, Latvia and Estonia
- Until recently, the total cost rate of these “interest-free” loans was up to 500%, 600% per annum, but now it is legally limited to a maximum of 55%
Authors: INBOX7 team
Faced with low salaries and inability to pay monthly bills, a large number of citizens decide to take a loan, hoping that next month will be better than the previous one. While money used to be borrowed from friends or relatives, now there are new “saviors”.
These are financial companies known to the public as quick loan companies. With an aggressive advertising campaign and their slogans, they attract Macedonian citizens to use the services they provide.
They are imposed on the market as an alternative to bank loans and loans from savings houses and micro-financial organizations that have been operating in the country for more than 20 years.
Their advertisements say – “money shop”, “0% interest, no costs, no guarantors”, “Approval for 30 minutes, payment immediately”…but how does their system function in reality?
MARKETING TRICK AND REAL INTEREST
The advantage of these financial companies is that realistically they offer the simplest conditions for their loans. Usually, the first loan, which can start from a minimum amount of MKD 3,000 to up to MKD 60,000, but also more, is with no interest if you return it within the agreed period of a week, two weeks, a month, two, three, etc. If you cannot return it within the agreed time limit, then the companies may approve a delay, but you will pay interest that can range from 8% for a seven-day delay to up to 20% for 30 days.
“Financial companies have gained a pretty bad public image over the past few years. Using marketing they attracted citizens with loans for which there is supposedly no interest, or the interest is in the legally prescribed maximum 8 percentage points above the reference interest rate in the country. But the problem was in the so-called total cost rate (TCR), for which these companies did not have any restrictions, so often it could amount to 300, 400 or 500%”, says our interlocutor employed in the financial sector who wanted to remain anonymous.
That is why, he says, somebody would get a loan of 12,000 denars and needs to return 18,000 denars in a month, which is 50% interest on a monthly basis. “So you can see now how much interest it is on an annual basis”, adds the interlocutor.
For these reasons, at the end of last year the Government proposed legislation changes, limiting this TCR to a maximum of 55% per annum, or 5 times in the penalty interest rate of 11%. These legal changes have already entered into force and now the borrowers will not pay excessive costs and will minimize the risk of further deterioration of the situation of the borrowers who have problems with repayment of the loan.
QUICK LOANS BUSINESS INCREASING
But despite this “wings cutting” of financial companies, the interest in this business does not cease. This is evident from the number of these constantly growing companies, as well as from the total assets of this business sector, reflected in the data from the National Bank, analyzed by INBOX7.
According to them, the total assets of all financial companies in the country amounted to MKD 3.24 billion (about EUR 53 million) at the end of the first quarter of this year, compared to 2.4 billion MKD at the end of the same period last year, or 1.3 billions the same period in 2017. Which means, in two years, the assets of the financial companies (as well as their number) increased by 2.5 times.
The amount of loans granted by these companies at the end of the first quarter this year amounted to 2.84 billion denars (about 46 million Euros), an increase of 55% for one year and 170% for two years. When analyzing these figures, one should bear in mind that in the balance sheets of financial companies, in the total assets, other than quick loans, it comprises the issuance of credit cards and factoring, or the acquisition of outstanding receivables. Last year financial companies ended up with a 43% higher amount of approved loans compared to 2017, and by as much as 190% or slightly three times more than in 2016.
INITIAL CAPITAL FROM 100 THOUSAND TO 5 MILLION EUROS
Currently there are 24 financial companies in the Register of financial companies published on the website of the Ministry of Finance. The first ones were registered and received a work permit in 2011, and the latest licenses are from March and April this year. Five of these 24 companies are registered exclusively for loan approval, while the rest have other financial activities, such as factoring and issuing guarantees. There is also a company whose activity is only the issuance and administration of credit cards, specifically, “Diners Club International”.
The INBOX7 research shows that the smallest main equity with which one of these financial companies is registered is MKD 6 million, or about EUR 100 thousand, with the company “Pro Inter Capital Dooel Skopje”, while the highest founding stake we noted in the Register is in the amount of 288 million denars (about EUR 4.7 million) at the Financial Credit Center “BS DOO Skopje”. Of these 24 financial companies, 17 are registered in Skopje, three are in Bitola, and one in Ohrid, Prilep, Strumica and Shtip.
JANKOVSKI, MICEVSKI, ZAEV…IN THE MANAGEMENT BOARDS
Among the members of the management bodies of the financial companies, according to the documents that INBOX7 received from the Central Registry of North Macedonia (CRNM), there are several famous names that were or still are related to politics. Besides Bozhidar Jankovski, who is a longtime director of Diners Club in North Macedonia and husband of Minister Radmila Sekerinska, we also noted the name of Siljan Micevski, former mayor of Bitola, once connected with the big financial affair TAT. Mickovski is now the owner of several large businesses in the country, including GP Pelister, Eurofarm, and in this case the financial company “Pelister Dooel”. Katerina Bojovic – Zaeva is a member of the management of the former savings house “Peon” from Strumica, re-registered in 2013 as a financial company with credit, factoring and issuing guarantees. According to the writings of the portal Leader, this company is owned by members of the family of Prime Minister Zoran Zaev.
WHO IS BEHIND THE QUICK LOAN FINANCIAL COMPANIES?
Recently, the financial companies, or at least seven of them, have decided to organize themselves into an association, that is, the Alternative Financial Services Association of North Macedonia (AFD), whose founding members are: Tigo Finance DOOEL Skopje, MOGO Credits DOOEL Skopje, M Cash Macedonia DOOEL Skopje, IUTE Credit Macedonia DOOEL Skopje, Digital Finance International DOOEL Skopje, Credissimo DOOEL Skopje and SN Finances DOO Bitola.
According to the documents received from the Central Registry, the owners are dominated by individuals and companies from Russia, the former Soviet republics of the Baltics and Bulgaria. Thus, the owner of Digital Finance International Dooel Skopje is the Russian billionaire Oleg Viktorovich Boyko, who has this type of business in other countries in central and southeastern Europe, and he founded the company in Macedonia in October 2016 with an investment of 300 thousand Euros. Otherwise, Digital Finance is a company well known on the domestic market by its brand for quick loans Forza.
The owner of Credissimo Dooel is Credissimo AD Sofia, whose manager is a certain Sokol Radostinov Jankov, and the company in the country has been formed with an investment of 100 thousand Euros.
With the same amount of the deposit the company M Cash Macedonia was formed, whose owners are Access Finance, also from Sofia, Bulgaria, and the manager is Dimitar Aleksandrov Prodanski.
MOGO Dooel has been established by MOGO Finance S.A. based in Luxembourg, with a founding capital of 200 thousand Euros, and the main activity is financial leasing for cars. Manager of the Luxembourg firm is Rainers Vilans, with a residence address in Riga, Latvia.
The owner of Tigo Finance, Aigars Kesenfelds, who founded the company in Macedonia with a stake of 400 thousand Euros From is also from this country.
From the neighboring Estonia comes the owner and founder of Iute Credit Macedonia, that is the company AS Iutecredit Europe, headquartered in Tallinn, the capital of this Baltic state.
The only company among the seven members of the Association that is formed with domestic capital is SN Finances from Bitola, with a cash deposit of 210 thousand Euros, whose owners are seven partners: Blagoj Krstevski, Hristo Kondovski, Nikola Mitrovski, Nikola Joshevski, Peco Stojanoski, Petar Miloshevski and Zoran Pejchinovski, all with a place of residence in Bitola.
The opening of the financial companies in the country was enabled by the Law on Financial Companies adopted at the end of 2010 and they are still a very small part of the total economy.
The explanation for the need to enter financial companies on the market by the Ministry of Finance, which was the proposer of the law, was that they should complement the credit activity of banks, especially for clients with limited access to bank loans because of their more conservative credit policies.
At that time, the public experienced these companies as a competition of banks. The law does not allow these financial companies to collect money from deposits from citizens and firms, but they are financed predominantly from their own capital and reserves, or borrow short-term loans in banks.
Next: Testimonies of citizens who got stuck in the whirlpool of “interest-free” loans? Why do financial companies still work at a loss despite their “usury” interests? What kind of consumer protection code have the financial companies signed?