Moscow (RIA Novosti economic commentator Nina Kulikova). A law on credit history came into force in Russia on June 1, 2005.
According to Sberbank (the Savings Bank of Russia), household deposits reached $68 billion last December, a 200% increase in three years, whereas retail lending had hit $20 billion by the end of 2004. Consumer lending was up 400% in the same three years, thereby forging ahead in the retail services market. The VISA International research company said consumer loans were mostly taken out in Russia to purchase household appliances (41%), computer equipment (37%), clothes (such as furs and sheepskin coats - 15%) and cars (6%).
More and more new players, primarily foreign banks, are emerging on the Russian market. Alexander Brinza, Sberbank's deputy chairman, said the share of foreign players on the retail lending market had jumped from 5.5% to 7.5%. The Russian retail financial market is also an attractive option for CIS and Baltic banks, and although it is difficult for them to compete with European and American giants, the potential of the market is so great that there is room for everyone.
In fact, experts estimate that 70% of Russians keep their savings at home, and only 2% use consumer lending services. The main reason is that the culture of living on credit has not yet struck root in Russia. Consumers know little about taking out a loan, and have just as little faith in banks.
Consumer lending interest rates are high in Russia, averaging from 15% on hard currency loans and from 20% on ruble loans a year. However, a survey conducted by the Business Vision agency showed that the interest rate was the decisive factor when it came to taking out a loan for only 19% of Russian borrowers. It was more important to 36% of those surveyed that loans were offered at the point of sale. A bank's prestige and whether or not it had affiliates mattered to 33% and 12% of respondents, respectively.
Some experts consider that consumers are ready to pay high interest rates because of a huge backlog of demand for bank loans, particularly mortgages. Others say that people have no idea of how high interest rates should be. Besides, people often make a single purchase on credit and do not plan to borrow any more. Lou Naumovski, VISA International senior vice president, is certain that although high loan interest rates do not discourage the Russian consumer, this situation will not last long. The era of high rates will end soon, as people start to know more.
The new law on credit history is expected to contribute to help Russia's financial market develop. It determines the procedure for storing information to keep track of borrowers' payments on loans. The financial authorities say this mechanism will protect both creditors and borrowers. In addition, lower risks may bring interest rates down.
However, the law will not have any effect until a mechanism for exchanging information between banks and lending agencies is established. There are some problems that must be solved, primarily with the technology involved. As every bank uses its own computer system, considerable sums will have to be spent on setting up a common database. Secondly, credit histories already stored by banks cannot be automatically shared with new agencies for legal reasons. In fact, this can only be done with the client's consent, which is why a credit history database will have to be built from scratch. Anatoly Aksakov, the deputy chairman of the State Duma's committee on credit institutions and financial markets, thinks the first results of the credit history law will be felt in about three to five years.
There are already several credit agencies in Russia, including the National Credit History Bureau, with the participation of America's Transunion-Crif, at the Association of Russian Banks, and the Experian-Interfax credit bureau, which was set up in cooperation with Britain's Experian.
Experts are optimistic that the combination of the experience of such international giants as Transunion and Experian and their Russian partners' knowledge of the local market will produce positive results.
