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The experts of the Institute carried out the financial and analytical part of the work.

In particular, the founder and chairperson of the board of the Growford Institute Vitalii Lomakovych, the Head of the Money Markets Department Mykhailo Dzhus and the Financial analyst Andrii Korniets were involved in the research.

On October 18, the USAID project published the results of the study.

Researchers have concluded that Ukrainian borrowers continue to face high interest rates and low compliance with consumer lending legislation by banks and financial companies. According to the results of the last mystery shopper survey of banks, the average real annual interest rate (RAIR) of a bank loan for personal purposes is 121% per annum, i.e., almost unchanged compared to 138% recorded by the Project in 2019. A similar study of financial companies offering microloans showed that the average RAIR was an astronomical 28,000% per annum. Both banks and financial companies do not comply with the requirements of the Law on Consumer Lending regarding the terms of contracts, disclosure and advertising. Financial institutions also have difficulties with the statutory calculation of RAIR in accordance with the methodology established by the National Bank of Ukraine.

The main results of the study of consumer lending practices by banks include the following:

• Banks often do not use the NBU’s methods for calculating RAIR. In 37% of agreements signed by “mystery shoppers”, RAIR, according to the calculations of the “Financial Sector Transformation” Project, differed from the RAIR specified in the agreement.

  • Banks also continue to “pretend” that insurance is not mandatory, but require borrowers to sign an insurance contract as part of a loan. Almost half of consumer lending passports did not state that insurance was mandatory. In addition, only 6% of loans requiring insurance provided the borrower with a choice of at least three insurance companies, as required by law.

• Many loan agreements contain terms that are illegal. For example, 77% of agreements provided for the right of the lender to demand early repayment of the debt in case of borrower’s disagreement with the proposal to increase payments under the loan agreement, and also gave the bank the right to change the terms of the agreement unilaterally (for example, to change the penalty).

Banks are not the only institutions that violate the rights of consumers in the credit market. From January 8, 2021, the Law “On Consumer Lending” came into force for microloans issued by financial companies. Financial companies generally did not bring their loan agreements in line with the Law “On Consumer Lending”. 86% of agreements contained provisions that may be considered illegal (most often it concerned an increase in the interest rate for violation of obligations by the consumer and the application of fines and penalties for the same violation). In 51% of the visits, the companies collected more from borrowers than they should have collected according to the agreement. It is very difficult for average microloan borrowers to calculate this on their own and understand that they pay more for an already expensive loan.

“The results of the study of consumer lending practices by banks and financial companies are deeply disappointing,” said Robert Bond, USAID’s Financial Sector Transformation Project Manager. “It is impossible to develop the consumer lending market if you charge high interest rates and use misleading practices, violating the law. And from the point of view of financial well-being of Ukrainians, current lending practices are simply harmful”.

NOTE: Both the reports “Consumer Lending by Banks: High Rates, Low Compliance” and “Impact of New Legislation on the Microcredit Market” can be found at:

– Consumer lending by banks: high rates, low compliance

– The impact of new legislation on the microcredit market

Both studies were conducted by the research company Info Sapiens with the involvement of the expertise of the NGO “Growford Institute” and the Legal Alliance “LCF” for banking research. The description of the methods used in the studies is given in the reports.