Finance and Credit

Russian microfinance organizations: Development trends and the problem of involvement in illegal financial transactions

Vol. 24, Iss. 7, JULY 2018

Received: 28 May 2018

Received in revised form: 13 June 2018

Accepted: 27 June 2018

Available online: 27 July 2018

Subject Heading: Banking

JEL Classification: G21, G28

Pages: 1637–1648

Evlakhova Yu.S. Rostov State University of Economics (RSUE), Rostov-on-Don, Russian Federation

Subject The article addresses operations of microfinance organizations, their development indicators, triggers and checks of their growth, particularly those connected with involvement in illegal financial transactions.
Objectives The objective of the research is to identify development trends of microfinance organizations for the entire period of their existence in the Russian financial market, i.e. for 2009–2017.
Methods The study draws on theories of institutional dynamics, the theory of finance, and concepts of financial market functioning. General scientific and empirical methods include the comparative analysis, methods of tabular and graphic interpretation.
Results The findings demonstrate a positive trend in the development of Russian microfinance organizations during 2009-2017 and an apparent demand for their services. Nevertheless, the paper unveils that these institutions substantially lag behind banks in terms of issued loans.
Conclusions Toughening the regulatory requirements will have a positive impact on the sector development, as it balances the level of risk and degree of coverage. Strengthening the positions of microfinance organizations in the consumer lending niche and increasing their role in the structure of sources of funds for small businesses represent a perspective area of the sector growth. Engaging in roguish schemes and money laundering processes, activity of illegal creditors can put brakes on microfinance companies' development. To prevent their involvement in illegal financial transactions, the paper offers to range regulatory measures depending on the specifics of such transactions.

Keywords: financial monitoring, microfinance company, microcredit, microloan, money laundering scheme


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