Press release: Hit of recent years in consumer credit – micro-loans – will finally become safer for consumers thanks to the new Consumer Credit Act. So far they have been outside the legal framework on consumer credit.
This is why this segment has attracted a large number of non-solid lenders or even moneylenders. However, they are unlucky with the coming into force of the law. The Across Lender estimates that consumers have already borrowed more than USD 30 billion in this way in the Czech Republic.
Small microloan providers
Regardless of whether they are decent or not, it will end after the new law comes. The process of obtaining a license from the Good Finance and depositing a financial guarantee with the Good Finance will be problematic for them. The same fate awaits dishonest microloan providers.
At the same time, it draws attention to the dangers of this step. “It can be assumed that at least a larger proportion of these providers will move to the illegal level and will continue to offer microcredit from the street. emphasizes the Court.
The fact is that the consumers targeted primarily by these fraudsters have a low level of financial literacy. If the state does not carry out its surveillance and repression activities with due emphasis, a large number of socially weak citizens of the Czech Republic may end up in the hands of usurers. “The New Testament will not help them in this, because they do not even know about it, they do not know it, and even if they do not know how to defend themselves, what is wrong and what is not,” explains Soudný.
The choice of providers will be decided by small details
The amendment to the law will lead the market to stabilize the market and further cultivate it. “We do not expect that a reduction in the number of micro-lenders would lead to the cost of this product. On the other hand, the competitive struggle will intensify – and it will be up to consumers to learn to choose well.
While so far we have taught clients to choose only from safe lenders, and other factors for selection have been secondary, the selection of safe lenders is newly taken up by the state through Good Finance licenses. Consumers will thus have to learn to choose providers according to other parameters and to use non-bank loan comparisons.
Therefore, we expect a number of other services related to micro-loans, which companies will try to differentiate from each other, will grow, ” Astro anticipates on behalf of the Across Lender. It is not easy to distinguish a real advantage or added value from a simple marketing action today.
It can also be assumed that microloans will be one of the products on which credit companies will try out technological innovations and other ways of selling, especially via the Internet. For example, working with augmented virtual reality cannot be excluded.
Some of the history of microloans
Although this may not seem, microloans are not new. Similar products appeared for the first time in the 18th and 19th centuries, especially in the territory of present-day Great Britain and Ireland. At the same time, in Germany, the then micro-loans served to support local peasants.
Modern micro-loans then reappeared in 1950 in Eastern Pakistan, where they were provided as part of a specific way of community funding. Although the project failed, as a result, it set a new trend.
It was continued by the Instant Care Bankz, which is considered to be the first de facto provider of modern micro-loans in the world. Its founder Muhammad Yunus started the project in the small village of Jobra, using his own funds. He provided the money to the poorest people. His initiative was gradually followed by other organizations.