High interest rates halted consumer loans
On April 7th, the National Bank published data on individuals’ debt on consumer loans.
In 2012, amid rising real incomes, consumer lending in Belarus increased significantly. Interest rate under some credit agreements was over 100%, but a number of tricks were used to mask it. The government’s ban on hidden fees and commissions and the demand to show full interest rate resulted in slowdown in consumer lending.
In 2012, the volume of outstanding consumer loans in the national currency, grew from BYR 7.6 trillion to BYR 10 trillion or by one-third. Consumer loans in foreign currency were banned in Belarus since mid-2009. Strong growth in consumer lending is associated with increased incomes, aggressive advertisements of consumer loans by both, traders and banks, as well as not always proper actions of some banks, which were attracting consumers with extremely low rates while masking the real picture with high bank fees and additional payments.
On January 22nd, 2013 amendments to the Banking Code enforced a ban on the collection of additional fees and other payments under consumer loan agreements, other than the interest rate. The amendments proved to be effective. Since early 2013 consumer debt grew by 2.2% only, or BYR 218 billion. On April 1st, household debts on consumer loans was BYR 10.2 billion. The 80-90% annual interest rate on consumer loans, against the background of relative stability in the foreign exchange market stopped potential borrowers and forced them to review the feasibility of borrowing at high interest rates.
Thus, a number of banks, which have used tricks to mislead consumers, were unable to manipulate the interest rate, and consumers have become more financially aware. It is anticipated, that the consumer credit market will be reformed in favor of larger and, above all, state-owned banks. Banks, providing consumer loans services will have to revise their approaches in working with the population and seek for new operational opportunities to maintain the profitability.
The Belarusian authorities regard the Catholic conference as yet another international event to promote Minsk as a global negotiating platform. Minsk’s proposal to organise a meeting between the Roman-Catholic Church and the Russian Orthodox Church is rather an image-making undertaking than a serious intention. However, the authorities could somewhat extend the opportunities for the Roman-Catholic Church in Belarus due to developing contacts with the Catholic world.
Minsk is attempting to lay out a mosaic from various international religious, political and sportive events to shape a positive image of Belarus for promoting the Helsinki 2.0 idea.
Belarus’ invitation to the head of the Holy See for a meeting with the Patriarch of the Russian Orthodox Church should be regarded as a continuation of her foreign policy efforts in shaping Minsk’s peacekeeping image and enhancing Belarus’ international weight. The Belarusian authorities are aware that their initiative is unlikely to find supporters among the leadership of the Russian Orthodox Church in Moscow. In Russia, isolationist sentiments prevail.
In addition, for domestic audiences, the authorities make up for the lack of tangible economic growth with demonstrations of growth in Minsk’s authority at international level through providing a platform for religious, sportive and other dialogues.