Inland Empire: Life in Russia Without Visa and Mastercard

buyerThis woman is happy she doesn’t live in Russia, where Visa and Mastercard may soon be banned. Courtesy of Fluencia

Inland Empire: How Will Russians Live Without Visa and Mastercard?
Sergei Khestanov
Republic
July 12, 2019

The new attack by Russian lawmakers on the international payment systems Visa and Mastercard may come to a head, successfully or unsuccessfully, this summer. For the law bill’s sponsors success would mean the near-total financial isolation of Russians from the rest of the world. All that would remain would be to adopt restrictions on foreign currency.

Going Our Own Way
There had long been talk of the need to talk of a completely autonomous domestic payments system, but the events of 2014 and, especially, the imposition of sanctions visibly accelerated the process.

In fact, in the spring of 2014, MPs in the Russian State Duma drafted amendments to the law “On the National Payment System” that would have forced Mastercard and Visa, which had been obliged to observe the sanctions against a number of Russian banks, to deposit amounts of money equal to their two-day turnover in special accounts at the Russian Central Bank. Visa said it would stop doing business in Russia. Negotiations with the Russian government and Central Bank followed this announcement. The draft law was considerably softened. The amount of the obligatory deposit was removed from the bill, and it was decided that international payment systems would operate in Russia through specially established local subsidiaries.

After Mir bank cards were launched, they were quite unpopular among Russians for a long time. Russians preferred time-tested foreign bank cards. Besides, initially there were purely technical problems with Mir that caused their cards to be rejected, but after the Russian Central Bank issued stern warnings, banks updated the software of their ATMs and payment terminals, more or less solving the glitches.

Another problem is that Russian cards are nearly useless abroad since they are accepted almost nowhere. However, given the small percentage of Russians who travel abroad, this is not such a huge problem.

The breakthrough in promoting the domestic cards came in 2018. On July 1, 2018, the electronic wage payments of all state-sector workers were transferred by law to Russian bank cards. By January 1, 2019, they had taken a big bite out of the share of the Russian market controlled by their famous competitors. According to the Federal Anti-Monopoly Service, during the period from January 1, 2018, to January 1, 2019, the share of actively used Visa cards among the Russian populace fell from 45% to 39.5%, while Mastercard’s share fell from 42% to 36%. The reduction in the international payment systems’ share of the Russian market happened as Mir doubled its share of active card users, which rose from 12.5% to 24.5%.

This is not surprising. The traditional Russian principle of pushing certain things, ironically dubbed the “voluntary compulsory” method, is rather effective. Outcomes are achieved quickly, making such methods of promotion quite popular. We should say, in all fairness, that this happens not only in Russia.

Such aggressiveness has a price, however. Compulsory promotion of goods and services reduces competition, since the advantages of using a particular service or buying a certain product derive from the market’s absence. Over time, products and services pushed in this way lag behind their absent competitors in terms of their quality.

Striking examples of diminishing quality in a market in which competition was restricted were the Soviet automobile and electronics industries. The latter lagged behind the world especially disastrously. Remember the old joke, “Soviet handheld calculators are the biggest handheld calculators in the worlds”?

Rejecting the Outside World
But degradation as a consequence of pushing goods and services through non-market methods is only half the trouble. It is much more dangerous to ban and expel foreign products and services from the domestic market. The new regulations described in the draft law “On the National Payment System” could force international payment systems out of Russia since they would be unable to comply with the regulations. Once they leave, Russian bank cards would not be accepted for payment abroad, and cards issued by foreign banks would not be valid in Russia.

Mir cardholders who never travel abroad would not even notice this nastiness. Everyone else would soon voluntarily be forced to join them. Give the Russian state’s high and growing share in the Russian economy, the regulations would not provoke fatal disaffection with the leadership.

Russia’s policy of self-isolation was adopted long ago, and a large segment of the populace has no real objections to it, while people who use their bank cards within Russia mostly do not care what system processes their transactions. What matters is that everything works fine and does not cost too much. Mir’s reliability is now on a par with the international payment system, and so are its rates. Besides, if push came to shove, the Russian Central Bank and the Federal Anti-Monopoly Service could force it to reduce its rates.

There are no rational reasons for establishing a homegrown system when the duopoly of Visa and Mastercard serve the Russian market just fine. China’s UnionPay and Japan’s JBC have been processed by certain Russian banks, but they have never played a significant role. You cannot make money in a highly competitive, mature market, long dominated by world leaders like Visa and Mastercard, unless you employ non-market methods of competition. The market simply does not need new players.

The reason for the persistent promotion of Mir card is not commercial. It is an insurance policy of sorts, one that will have claims made on it if real, harsh Iranian-style sanctions are imposed on Russia. If you regarded this scenario as a serious possibility you would have cause to establish a national system, especially because Chinese banks (on whom great hopes were placed in 2014) have essentially supported US sanctions. In these circumstances, it is better to have a stunted system in terms of its international access than to witness a sudden collapse of cashless payments if harsh sanctions are imposed.

However, this non-competitive idea immediately inspires people who are willing to make money by destroying their competitors.

If regulations pushing the international payment systems out of the Russian market were adopted, it would deprive Russians of the ability to pay for things abroad without cash, and the logical next step of banning or restricting the export of foreign currency from the country would be easy as pie. Simultaneously, Russians would find it much harder to purchase foreign goods in foreign online shops, something that would be incredibly difficult without access to international payment systems.

A side effect of the ban would be the promotion of Russian-registered joint ventures for selling Chinese goods to Russians.  This would have a positive effect on the receipt of VAT from these purchases. VAT matters since VAT revenues constitute up to a third of Russian federal revenues, making them comparable to Russia’s export revenues.

The natural consequence of depriving Russians of access to foreign online shops would be a rise in prices. At first, the government would profit slightly because VAT revenues would grow—until people stopped buying things.

The policy of isolating the Russian economy from the world economy in terms of Russian nationals being unable to spend money outside Russia has been reasserted, and yet another step on the long road of restrictions and bans may soon be taken. The tendency towards restrictions on foreign currency has once again been confirmed. We might recall the recent discussion about restricting unqualified investors from opening foreign currency accounts.

The hope remains, of course, that, as in 2014, the international payment systems would reach an agreement with the Russian government, Russian MPs would be reined in, and cardholders would not feel the pain. Unlike 2014, however, the Russian Central Bank has supported the bill.

Sergei Khestanov is a macroeconomics adviser to the director of Open Broker and associate professor of financial markets and financial engineering at RANEPA. Translated by the Russian Reader

Out of Sight, Out of Mind

DSCN1726Goodbye to all that. Exchange rates for the US dollar and the euro, as displayed electronically on the door of Zauber Bank, Ligovsky Prospect, September 19, 2018. Photo by the Russian Reader

Putin Signs Law Banning Outdoor Currency Exchange Rate Electronic Display Boards
Delovoi Peterburg
December 18, 2018

President Putin has signed a law banning outdoor foreign currency exchange rate electronic display boards. The document was published on the Legal Information Website on Tuesday, December 18.

The document amends the law on foreign currency regulation. The Russian Central Bank now has the right to regulate how commercial banks post information about foreign currency exchange rates.

In Febrary 2018, the Central Bank proposed banning foreign currency exchange rate electronic display boards outside the premises of banks. The regulator explained the idea was prompted by the need to combat illegal exchange offices.

“As practice shows, information about foreign currency exchange rates is most often displayed outdoors by so-called illegal currency exchange points, which are camouflaged as limited service branches of authorized banks,” the Central Bank’s press service explained.

In December, a law bill that would grant the regulator the right to establish requirements for display of such information was adopted by the State Duma and approved by the Federation Council.

The Central Bank’s draft instructions explain that information about foreign currecy exchange rates can be placed only within the premises of an authorized bank and in such a way that the information is visible only inside the facility itself.

Translated by the Russian Reader

House of Cards

mir-sberbankA disembodied hand proudly holding a Sberbank-issued Mir card. Photo courtesy of PressTV

Central Bank Preparing for Cutoff of Some Banks from International Payment Systems
Regulator Asks Small Banks to Have Backup Intermediary Able to Service Their Cards
Anna Yeryomina
Vedomosti
December 6, 2018

The Russian Central Bank has asked small banks to find a backup partner that would be able to service their bank cards. This would be an asset if their current intermediary banks were cut off from international payment systems.

The Central Bank is concerned with the continuity of card transactions in banks that work with payment systems indirectly, that is, via an intermediary bank. The regulating authority has advised these indirect clients of payment systems to contract with another bank, besides their primary intermediary bank, that could supply them with access to card payment systems. Five bankers confirmed to us they had received the memorandum.

The memorandum also says the contract should provide for a test exchange of information when integrating with the new intermediary banks. It also states payment systems should draft an action plan and recommend it to their participating banks.

The major intermediary banks are Payment Center Credit Union, Uralsib, VTB Bank, Rosbank, and Promsvyazbank.

A Central Bank spokesperson stressed the memorandum was only advisory, but it was based on international recommendations for risk management in payment systems. The need for banks to contract with backup intermediary banks is not so obvious. According to several of its recipients, in early autumn the Central Bank had sent banks a letter urging them to draft plans to ensure the continuity of payments, but it had not recommended any specific measures.

Switching intermediary banks is a time-consuming, expensive process that takes between three to six months, notes Maya Glotova, director of Kartstandart, a processing center that partners with Payment Center Credit Union. The most high-profile case occurred in 2013 after Master Bank’s license was revoked. As Glotova recalls, Master Bank had functioned as an intermediary bank in payment systems and provided payment processing services. Small banks had to halt their operations for several weeks, and several of them had to leave the payments business. Glotova estimates it would cost a single bank more than $100,000 to switch intermediary banks in the three payment systems.

Intermediary banks had little to say about the memorandum. A spokesperson at Promsvyazbank promised to follow the Central Bank’s recommendations, while a spokesperson at VTB Bank said their own intermediary program had worked well.

Several bankers believe the Central Bank is hedging not only against the collapse of intermediary banks but also potential sanctions, which are fraught with the possibility that intermediary banks would be cut off from Visa and Mastercard, as occurred in 2014 and 2015. The United States has been drafting a new set of sanctions that could affect major banks. Payments within Russia would not be affected: these transactions are processed by the National Payment Card System (NSPK). Russian bank cards, however, would not function abroad. (A spokesperson for NSPK, which operates the Mir payment system, said they had not received the Central Bank’s memorandum.)

VTB Bank had drafted a plan to counter sanctions, its president, Andrei Kostin, told the TV channel Rossiya 24 in October.

“We have been mapping out with both the government and the Central Bank how to avoid the consequences, especially for individuals and companies. I think we can overcome them. I don’t think the sanctions will be wholesale and directed against the entire financial sector,” Kostin said.

Translated by the Russian Reader

Falling

200 ruble note-1

200 ruble note-2A year ago, Russian Central Bank chief Elvira Nabiullina triumphantly introduced the new Crimea-themed two hundred ruble banknote into circulation. Since the economy is shaped more by flows of goods, resources, people, services, knowledge, and money, and the actions of ordinary people, decision makers, and the snake oil salesmen known as capitalists, and less by puerile revanchist neo-imperalist symbolism, the new banknote, pegged at €2.90 by Deutsche Welle only a year ago, is now worth a mere €2.65. I am keeping my specimen as a souvenir of the current bad times until better days arrive. Image by the Russian Reader

Fall in Real Incomes of Russians Accelerated Sharply in September
Economists Say Government’s Forecast No Longer Realistic
Tatyana Lomskaya
Vedomosti
October 17, 2018

Real incomes of Russians have declined for a second month in a row, Rosstat has reported. Their decline accelerated in September to 1.5% in annual terms after falling by 0.9% in August. Prior to that, they had grown for seven months, from the start of the year, by 1.7%. (This figure excludes the one-time 5,000-ruble payments made to pensioners in January 2017.) Real wages accelerated their growth in September, from 7.2% to 6.8% in the previous month.

Incomes of ordinary Russian had been falling for four years in a row, from 2014 to 2017, resuming growth only this year. In the first half of the year, they increased by 2.6%, mainly due to wage increases, notes Igor Polyakov from the Center for Macroeconomic Analysis and Short-Term Forecasting (TsMAKP). Business income increased only by 0.7%, while social transfers (excluding the one-time payment to pensioners) increased by 1.2%, which was significantly weaker than all incomes generally. Other sources of income decreased. There was a slight increase in incomes derived from property, but incomes received from securities and deposits decreased, as did, apparently, incomes from unreported activity, says Mr. Polyakov. He argues it is unlikely circumstances have changed considerably in recent months.

But the anxiety of Russians caused by the volatility of financial markets has increased, says Mr. Polyakov. People have taken to withdrawing cash from foreign currency accounts and transferring it to safe deposit boxes, as well as spending it abroad on holiday. Rosstat cannot register these expenditures and thus reduces its assessment of miscellaneous income. In August, the public’s net demand for US dollars grew by comparison with July from $0.8 billion to $1.7 billion, an increase of nearly 53%, the Central Bank reported.

Retail growth slowed in September to 2.2% in annual terms from 2.8% a month earlier. It is likely the public preferred buying foreign currency while curtailing consumption, argues Mr. Polyakov.

The drop in incomes combined with the serious increase in wages [sic] remains a mystery, writes Dmitry Polevoy, chief economist at the Russian Direct Investment Fund. The growth in real incomes in the first half of 2018 was mainly due to the presidential election campaign, notes Vladimir Tikhomirov, chief economist at BCS Global Markets. Salaries in the public sector and pensions increased rapidly. [That is, the Kremlin bribed Russians directly dependent on its largesse to get out the vote for President-for-Life Vladimir Putin—TRR.] After the election, growth stalled. And, after a palpable devaluation of the ruble in April and accelerating inflation, a dip in incomes was anticipated, argues Mr. Tikhomirov. In September, prices for imported goods rose. In addition, the seasonal discount on fruits and vegetables ended, and the July increase in utilities rates made itself felt, explains Mr. Tikhomirov.

By the end of the year, the incomes of Russians will gradually decline a little, while overall incomes will grow less than 1% on the year, predicts Mr. Tikhomirov. Real incomes might grow by 2% on the year, counters Mr. Polyakov. In any case, this is noticeably lower than official forecasts. The Russian Economic Development Ministry anticipated a 3.4% growth in real incomes in 2018.

Real incomes of ordinary Russians fell by 1.7% in 2017, although the government had forecast a 1.3% increase, the Federal Audit Chamber noted in its opinion on the draft federal budget for 2019–2021. When the forecast was corrected, incomes had decline dsteadily from the beginning of the year, and there were no preconditions for rapid growth by year’s end, the auditors write.

Income growth depends on whether private enterprise will increase wages, argues Mr. Polyakov, but thos wages will be subject to the planned rise in the VAT to 20% in 2019.

President Putin has set a goal of halving poverty by 2024. (The official poverty rate last year was 13.2% of the populace.) The Economic Development Ministry’s forecast significantly increased the growth rate of real wages and anticipated higher growth rates for real incomes, which has raised doubts at the Audit Chamber. There is no wage increase for public sector employees planned in 2019, while the growth of wages in the private sector will depend on growths in productivity.

Rank-and-file Russians have been forced into debt, write analysts from RANEPA and the Gaidar Institute in their opinion on the draft budget. By mid 2018, Russians owed banks 13.7 trillion rubles (approx. 181 billion euros), an increase of 19% from the previous year, they write, and an amount that significantly outpaces the increase in nominal incomes. It is an alarming trend that means an increase in the amounts of money ordinary Russians spend servicing loans, experts warn.

Translated by the Russian Reader

Stability

DSCN1722Russians queued up at a popular currency exchange in central Petersburg on September 19, 2018, as the ruble took yet another plunge, fueled by rumors that the regime was planning to “dedollarize” the Russian economy. Photo by the Russian Reader

Foreign Currency Deposits Withdrawn from Sberbank: Depositors Take Out Over $2 Billion in Two Months 
Vitaly Soldatskikh
Kommersant
October 6, 2018

In September, Russians continued to aggressively withdraw foreign currency from accounts in Sberbank (Savings Bank). Over the past month, the amount of these deposits decreased by $900,000,000, while the amount has decreased by more than $2 billion dollars since the beginning of August. The outflow of funds from the savings accounts of individual depositors took place as rumors of a possible forced conversion of foreign currency deposits grew. However, after reasurring statements by Elvira Nabiullina, chair of the Russian Central Bank, as well as a rise in rates on foreign currency deposits, the outflows may decrease.

On Friday, Sberbank published its monthly statement before other Russian banks, as usual. According to these figures, as we have analyzed them, the populace’s foreign currency-denominated bank deposits in Sberbank decreased by $901 million or 2.7% in September and now total $32.5 billion. Likely as not, Russians simply withdrew this money from the bank without exchanging it for rubles and redepositing it. According to Sberbank’s statement, the populace’s ruble-denominated sight deposits and term deposits descreased last month by 45.78 billion rubles or half a percent to 9.65 trillion rubles. Overall, the outflow of foreign currecy deposits slowed compared with August, when individual clients withdrew $1.18 billion from the bank.

Sberbank’s press service confirmed the outflow of $900 million in deposits by retail clients in September, but noted the inflow of funds from commercial clients amounted to approximately $1.5 billion. (This calculation was made using the bank’s in-house method.)

Sberbank termed August’s outflow of foreign currency deposits the product of a “managed evolution of the bank’s balance sheets.”

Meanwhile, in late August, Sberbank introduced a new seasonal foreign currency deposit plan, valid until the end of September, with annual interest rates that varied from 1.5% to 3%. (The highest rates was for customers willing to deposit a minimum of $150 million for a period of three years.) Currently, Sberbank’s highest interest rate for dollar-denominated deposits is 2.06%, whereas a number of major banks, including VTB Bank, Russian Agricultural Bank (Rosselkhozbank), Alfa Bank, and Rosbank, offer interest rates on dollar-denominated deposits of 2.5% per annum.

September’s outflow of deposits from Sberbank occurred as VTB Bank chair Andrey Kostin made a series of statements about the possible implementation of harsher sanctions, under which Russia’s state-owned banks could be stripped of the ability to make dollar-denominated transactions. Were this to occur, Kostin said, VTB Bank could not rule out having to disburse funds from dollar-denominated accounts in another currency as a way of upholding the bank’s obligations to its clients. These statements by the head of Russia’s second largest bank did not go unnoticed. Central Bank chair Elvira Naibullina was forced to calm bank customers by denying the possibility of a compulsory conversion of deposits. According to Naibullina, such moves would only undermine confidence in Russia’s banking system.

According to our analysis, foreign currency deposits held by commercial clients at Sberbank increased by $1.43 billion in September. This occurred largely due to the growth of long-term deposits by commercial firms. Deposits made for terms of three years or longer grew by $1.56 billion, while deposits for shorter terms shrunk. Also, the balances on the accounts of foreign companies grew by $902 million. The ruble-denominated balances on Sberbank accounts held by commercial clients grew by more than 222 billion rubles in September. This increase was mainly due to the nearly 151 billion rubles in additional monies raised by the Federal Treasury.

According to Fitch Ratings, the most considerable outflows in corporate funds, adjusted for fluctuations in the foreign currency exchange rate, were observed at Sberbank (117 billion rubles or 1.7%), Gazprombank (87 billion rubles or 2.8%), and Rossiya Bank (58 billion rubles or 9.4%). Retail deposits also declined mainly at Sberbank (107 billion rubles or 0.9%) and banks undergoing reorganization by the Central Bank (35 billion rubles or 3.2%), while other banks enjoyed a fairly uniform increase in retail deposits.

According to Ruslan Korshunov, director for bank ratings at Expert RA, the largest Russian credit rating agency, “Rumors of the Russian economy’s dedollarization and the possible conversion of foreign currency deposits into rubles could have pushed a segment of the populace to withdraw their money from state-owned banks, against which sanctions could be strengthened.”

At the same, Korshunov noted the outflow of retail deposits in September could also have been caused by a seasonal factor: the return of the populace from holiday and, consequently, an increase in consumer activity. However, he believed these factors had a one-off effect and such outflows were highly unlikely in October.

Translated by the Russian Reader

Life on the Installment Plan, Part Three

DSCN9641The “handy lawyer” at a place calling itself the Civil Legal Defense Center promises to relieve people “of their debts 100% quickly and legally.” Photo taken in central Petersburg on 22 July 2018 by the Russian Reader

Russians’ Bank Debts Grow Twice as Fast as Their Wages
Central Bank and Economic Development Ministry Plan to Reduce Banks’ Interest in Loaning to General Public
Tatyana Lomskaya and Emma Terchenko
Vedomosti
August 1, 2018

The Economic Development Ministry has reported individual consumer loans have been growing faster than wages and savings. In June, they grew by 15.9% in annual terms after a 15.1% uptick in May. If the season were not taken into account, this would amount to an increase of over 20%. However, real wage growth during the same period slowed to 7.2%, while the growth rate of savings deposits fell 7.1%. (The figures for May were 7.6% and 7.7%, respectively.)

The entire portfolio of loans to the general public increased by ₽1.1 trillion to ₽13.3 trillion [approx. €181 billion] during the first six months of 2018, according to figures from the Central Bank. Sberbank alone lent a record-breaking ₽714 million [approx. €9.7 million] in consumer loans during this period, which was 74% more than a year ago, while VTB Bank supplied the general public with ₽400 million in loans or 32% more than over the same period in 2017.

The public’s demand for consumer loans has grown. Inflation is relatively low in the wake of 2014, the Central Bank’s key rate has stabilized at a low level, and wage growth has picked up, explains Sergei Shirokov, managing director of Sberbank’s Borrow and Save Division.  Since the start of the year, VTB has twice improved the terms of its loan programs and increased the issuance of loans by 17%, notes Dmitry Polyakov, a vice-president at the bank.

Companies, on the contrary, have increasingly gone on a savings binge, writes the Economic Development Ministry. In June, they increased their bank deposits by 8.3% in annual terms. (The increase in May was 6.5%.) Their outstanding loans have also grown, but only by 2.8%, compared to the same period in 2017, or by 3.3% when corporate bonds are taken into account. (In May, the same figures grew by 2.6% and 3.1%, respectively.)

Banks have focused on lending to the public. Under current regulations, they find this more profitable than lending to businesses, complained Economic Development Minister Maxim Oreshkin. This circumstance worried his ministry, he said. He suggested the Central Bank should make it more profitable for banks to loan to companies as opposed to making consumer loans. The ministry did not respond when we asked whether Minister Oreshkin, as a member of Sberbank’s advisory board, had voiced his concern about the high rate of consumer loans issued by Sberbank.

Retail lending has actually been recovering faster than corporate lending, partly because the public vigorously decreased their debts to banks in 2015–2016, whereas now, as wages have increased and rates have hit bottom, they have again accumulated debts, says Natalya Orlova, chief economist at Alfa Bank. Banks are also more interested in lending to individual due to western sanctions against Russian companies, she continues. If a company is at risk of western sanctions, it might also have trouble paying back its loans. Unlike mortgages, however, the growth of consumer loans has almost been exhausted. Outstanding loans have nearly reached 10% of GDP, the maximum for Eastern Europe, warns Orlova.

Consumer lending started to recover last year amid falling personal incomes. People were able to increase consumption only by taking out retail loans, analysts at RANEPA noted. In early 2018, on the eve of the presidential election, the salaries of state-sector employees increased dramatically. The government had to make good on President Putin’s May 2012 decrees and bring the salaries of teachers, doctors, and researchers to 100–200% of average regional wages. On the heels of the wage increases, personal incomes rose by 4,2–5,6% in annual terms from February to April. In May and June, however, real personal incomes of Russians returned to a near-zero growth rate. This sparked an increase—from 12% in May to 22% in June—in the percentage of Russians who anticipated that their family’s financial circumstances would worsen over the next year. The percentage of people who excepted their fortunes to change for the better shrunk from 24% to 19%, according to a poll conducted by inFOM.

The Central Bank has already been reducing the profitability of consumer loans for banks. The risk ratio for unsecured consumer loans was increased on May 1, and the regulator plans to raise it again on September 1 for loans whose total cost exceeds 10% per annum. The Central Bank has been also been reviewing other proposals for stabilizing the growth of consumer loans, said Vasily Pozdyshev, the Central Bank’s deputy chair, as quoted by RIA Novosti. For example, increased oversight requirements could be applied to banks whose consumer loan portfolios increased much more quickly than the market average, or the growth of such loans could be restricted, said Pozdyshev. According to him, the banks had made an interesting propose to introduce differentiated risk ratios for consumer loans depending on their amount: large loans in amounts greater than ₽300,000 [approx. €4,000] would bear the greatest risk ratio. In addition, as of 2019, banks should start regularly calculating the PTI (payment to income) ratio as a means of determining a customer’s credit worthiness, although the Central Bank would not use it as a regulatory instrument befored 2020, added Pozdyshev.

High-risk borrowers are more likely to seek loans from microfinance institutions (MFIs). According to the National Credit History Bureau, MFIs issued ₽26.3 billion [approx. €358 million] in so-called payday loans from April to June, which was 23.8% more than last year. Vulnerable segments of the populace are already seriously indebted, says Georgy Okromchedlishvili, principal analyst at ITS Wealth Management, and significant growth in these loans is not anticipated in the future, but nor is a noticeable decline expected. Stable economic growth has to be in place for that to happen, he argues.

Translated by the Russian Reader

Sergey Abashin: Remittances by Central Asian Migrant Workers in Russia during the First Quarter of 2018

central asian migrant workerCentral Asian migrant workers hard at work on a roof in central Petersburg on a Sunday in early May.

Sergey Abashin
Facebook
June 18, 2018

Finally I’m writing again about migrant workers, a subject that right at the moment interests very few people.

Data on remittances by private individuals from Russia to other countries for the first quarter of 2018 has been released by the Russian Central Bank after a great delay. Here is the picture they present.

Uzbekistan was the leader among the CIS countries. Its nationals remitted $726 million, which is 17% more than in the first quarter last year.

Tajikistan came in second place with $487 million, which is 15% more than the same time last year.

Kyrgyzstan took third place with $434 million, 9% up from the first quarter last year.

The figures thus show a significant increase in remittances, which testifies to an growth in the wages paid to migrant workers and an increase in the numbers of migrant workers themselves. Remittances to Kyrgyzstan have been growing more slowly, but in fact that means a large portion of the money earned by Kyrgyz nationals now stays in Russia to be spent on setting up their lives here.

P.S. By the way, the champion in terms of private remittances received from Russia is Switzerland—to the tune of $1.7 billion.

Photo and translation by the Russian Reader