Russia’s Micro-Loan Mess, Explained
15 June, 2020
Artwork by Peter Sarukhanov/Novaya Gazeta

In 2017, small business owner Natalia Barinova needed a loan to purchase stock for her cosmetics store in Tver, a city northwest of Moscow. She borrowed 12,000 rubles (around $175) from two microfinance organizations with a daily interest rate of 2% or 775.6% annually.

For nearly a year, Barinova paid more than $100 a month in interest. Then her business started to experience difficulties. That marked the start of a nightmare that would haunt her for years to come.

There’s a growing backlog of stories like Barinova’s all across the country. As Russia is plunged in a deep crisis by the Great Shutdown and collapsed oil prices, more Russians face a similar fate.  Our partner outlet Novaya Gazeta brings to light the stories of victims of the Russian micro-loan mess.


Even before the Covid-19 pandemic, the country had a growing household debt problem. In the past four years, it has risen by a third as incomes kept falling amid poorly regulated lending practices. Experts believe the outbreak is set to exacerbate the problem.

More than 21 million people in Russia are living below the poverty line and 60% have no savings at all. The state-defined minimum wage in Russia is currently around $165 a month. Incomes have been on the decline for the past seven years and analysts predict that the pandemic will make Russian citizens 10% poorer than a decade ago. They anticipate that incomes will fall by 5% in 2020.

Russia introduced a poverty reduction plan in 2018 but the country’s poverty rate has actually become worse since then.

“They said they could give me a funeral wreath”

Natalia Barinova. Photo: Social networks

Barinova had paid off the amount she borrowed several times in interest. Still, the collectors kept coming after her, even when her business went bankrupt.

"The collectors constantly called, even at night," says Barinova. "They were interested in my health, they asked if I was alive. They said they could give me a funeral wreath."

Barinova was pregnant when the calls were coming in. She told the collectors as much, asking them to stop stressing her out.

"If I lose the baby, it will remain on your conscience," she told one collector over the phone.

"That's okay, you know [...] you can get a new one," Barinova recalls the collector's reply. 

In 2018, Barinova managed to fight off collectors thanks to numerous complaints to law enforcement agencies. But last month, the phone calls started again. On May 14, Barinova received a call from an unknown number. The woman on the other end of the line said she was calling from Money in Hand, where she had borrowed $100 three years ago.  Now, Money in Hand claims she owes them 147,900 rubles (around $2152) rubles and another micro-loan lender, Rosdengi, 132,320 rubles (around $1920).

"It is not clear to me how such amounts were calculated. But they demand it insistently," Barinova says.

Barinova cites the law that bans collectors from call a maximum of two times a week and only once in a day. But they would call much more frequently. 

"On May 15, for example, they called me four times," Barinova said. "I'm not refusing to repay the debt. I'm paying as much as I can. But now, due to the (pandemic — ed.) crisis, I'm on unpaid leave, and my company is bankrupt. I don't know what to do."

That night Barinova gave her last 5,000 rubles to the microfinance company, hoping to put an end to the harassment. But it didn't stop them from calling. Now, when the company employees call, they bring up the names of her relatives. Barinova never gave them this information and now fears the microloan company will start harassing her family.

The microloan companies did not respond to Novaya Gazeta's request for comment at the time of publication.

Threats and Vandalism

Artwork by Peter Sarukhanov/Novaya Gazeta

In some cases, collectors have gone further than phone calls. In Saratov, a city in southwestern Russia, collectors turned to threats and vandalism.

Novaya Gazeta spoke to a Saratov woman last month, who borrowed 10,000 rubles (around $145) from a microfinance organization for her daughter's medical treatment. But then problems started at work, and the woman was unable to repay the money. When she asked to defer her repayments, the threats began. She told Novaya Gazeta her story on the condition of anonymity.

Last December, collectors graffitied the entrance to her building. They returned several times, demanding that the woman open the door and pull out the electric wiring. When the Covid-19 crisis hit, they became even more aggressive.

In mid-May, security camera footage showed three men breaking down the metal door, then entering the building and breaking the light by the elevator. They proceeded to graffiti the entrance with threats, obscenities, and crosses.

When the incident made the news, the local police said they would look into the matter. But then refused to initiate criminal proceedings.

The National Association of Professional Collection Agencies head told Novaya Gazeta what happened in the city of Saratov was not the work of collectors, and his association had "nothing to do with these people."

Russia Has a Growing Problem with Household Debt

Artwork by Peter Sarukhanov/Novaya Gazeta

Dmitry Prokhorov, a lawyer and founder of an online group helping borrowers, says the number of people who are unable to repay their loans has recently doubled in Russia. He believes the Great Shutdown crisis will trigger further bankruptcies and new loans.

"People will be borrowing money for lawyers and to live. They have run out of their savings during the crisis and been left without work," he says, adding that since the pandemic, collectors started acting more impulsively.

"Some started being rude on the phone where they had not been rude before, while others had stopped calling where before they would be blowing up their phone," Prokhorov tells us. "Aggression began to manifest where it was not expected. But several collectors, on the contrary, have become more loyal."

According to Prokhorov, microfinance company employees and collectors aren't sanctioned to vandalize buildings, but people aren't aware of this. Meanwhile, the companies take measures to ensure they can't be connected with hooliganism or property damage.

"Moreover, [collectors] act cunningly," Prokhorov explains. "If the borrower says that they will complain, they tell them to go ahead and write to the prosecutor's office. But the prosecutor's office doesn't deal with this [...]. As a result, people receive refusals from the prosecutor's office and begin to think that [these companies] and collectors are untouchable."

Head of the country's main collector body, the National Association of Professional Collection Agencies (NAPCA) Elman Mehdiyev, rejects accusations of collectors becoming more intense during the pandemic. 

"It's been the opposite," he said. "If self-isolation was introduced in a region, trips to debtors stopped there."

Mehdiyev says that collectors are well aware that some of the debtors have lost revenue.

“Therefore, they launched a program under which the debtor can call the collection agency and report their difficulties. And they will receive a discount or installment plan [...] Because the collector is actually interested in receiving the debtor's money,” he said. “This can’t be achieved with threats and pogroms.”

Even if microloan companies are setting up installment plans for clients, Russia’s economic woes won’t be going away soon. Moscow's Higher School of Economics estimates that 12.5% ​​of the population will lose their jobs due to the crisis and around that same percentage of the population will only receive half of their previous earnings. Meanwhile, the Kremlin’s recovery plan has prioritized lifting corporations out of the crisis over citizens. Many borrowers will face significant struggles in paying back their loans, which will likely only see them sink further into debt.

/Translated and abridged by Natalie Vikhrov, with materials from Novaya Gazeta correspondent Ivan Zhilin. Courtesy of the Russian Language News Exchange.