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EDICT OF THE PRESIDENT OF THE REPUBLIC OF BELARUS

June 30, 2014, No. 325

On Attractingand Extending Loans,

Activities of Microfinance Organizations

Amendments and addenda:

Edict of the President of the Republic of Belarus No. 538, dated December 31, 2015 (National Legal Internet Portal of the Republic of Belarus, January 15, 2016, 1/16207)

To avoid unfair activities of legal entities in the field of attracting savings from citizens and extending loans to the same, prevent from abusive acts in the mentioned field, improve the operating procedure of regular attracting and extending loans, create conditions for further development of enterprise and business initiative through introduction of additional financing instruments, and protect the rights of consumer of services rendered by microfinance organizations:

  1. The following shall be established:

1.1.starting from August 1, 2016, monetary funds, irrespective of amount, may be borrowed (raised) from natural persons who are not individual entrepreneurs through signing a loan agreement, other contract providing for similar terms and conditions of transfer of funds,by:

profit-making organizations – from natural persons who are owners of property, founders (members) of such organizations; and no more than twice during a calendar month from other (one or more) natural persons;

non-profit organizations – from founders (members) of such organizations; and no more than twice in a calendar month from other (one or more) natural persons;

individual entrepreneurs – no more than twice in a calendar month from any one or more natural persons;

1.2.starting from January 1, 2015, monetary funds, irrespective of amount, may be borrowed (raised) from natural persons who are not individual entrepreneurs through signing a loan agreement, other contract providing for similar terms and conditions of transfer of funds,by:

profit-making microfinance organizations, non-profit microfinance organizations established in the legal form of a fund – from natural persons who are owners of property, founders (members) of such institutions;

non-profit microfinance organizations established in the legal form of consumer cooperatives – from their members who are the founders, and from their other members subject to compliance with criteria established by the National Bank.

Starting from January 1, 2015, organizations not mentioned in Part one of this Sub-clause, and individual entrepreneurs may borrow (raise) funds, irrespective of amount, from natural persons who are not individual entrepreneurs in compliance with requirements provided for by Sub-clause 1.1. of this Clause.

  1. It shall be established that starting from January 1, 2015, activity involving extending three or more loans within a calendar month to any one or more borrower in the amount not exceeding 15000 base values per borrower as of the day of signing an agreement (hereinafter “The Microloan”) shall be deemed the regular microloan extending activity.

The regular microloan extending activity may be carried out only by microfinance organizations which are legal entities registered in the Republic of Belarus and meeting the requirements applied by this Edict and regulatory legal acts of the National Bank, and included by the National Bank into the Register of Microfinance Organizations (hereinafter “The Register”).

  1. The following shall fall into microfinance organizations:

3.1.profit-making microfinance organizations which are legal entities registered in the Republic of Belarus in the legal form of business entities or unitary companies.

Profit-making microfinance organizations shall be engaged exclusively in regular extending,to natural persons, of microloans secured by borrower’s immovable property destined for personal, family or household use.

3.2.non-profit microfinance organizations which are legal entities registered in the Republic of Belarus in the legal form of funds or consumer cooperatives.

Microfinance organizations established in the legal form of funds may be engaged in regular microloan extending to natural persons for craft activity, rendering farm tourism services, private farm holding, business activities of a profit-making organization which property owner,founder (member) is a borrower who is a natural person; and microloan extending to small and/or medium-scale businesses[1] for their business activities.Microloan extending activity may be carried out by the fund exclusively for achievement of purposes specified in its statute.

The following microfinance organizations may be established in the legal form of consumer cooperatives:

the consumer cooperative for mutual financial assistance – a non-profit organization established by natural persons for accumulation of temporarily redundant funds of the members of such consumer cooperative and funds from other non-prohibited sources with a view to providing financial assistance in the form of microloans to the members of such consumer cooperative. Only natural persons engaged in craft activity, rendering farm tourism services, private farm holding, and natural persons who are property owners, founders (members) of profit-making organizations may be the members of such consumer cooperative. Microloans to the members of the consumer cooperative for mutual financial assistance may be granted only for craft activity, rendering farm tourism services, private farm holding, business activity of the profit-making organization of which such member of the cooperative is a founder (member);

the society for mutual financing of small and/or medium-scale businesses – a non-profit organization established by small and/or medium-scale businesses for accumulation of temporarily redundant funds of the members of consumer cooperative and funds from other non-prohibited sources with a view to providing financial assistance in the form of microloans to the members of the cooperative. Only small and/or medium-scale businesses may be the members of such cooperative. Microloans to the members of the society for mutual financing of small and/or medium-scale businesses may be extended only for the their business activities;

tier-two consumer cooperative – a non-profit microfinance organization established by consumer cooperatives for mutual financial assistance, societies for mutual financing of small and/or medium-scale businesses and/or finds for accumulation of temporarily redundant funds of the members of such consumer cooperative with a view to rendering temporary financial assistance in the form of microloans to the members of such cooperative;

The consumer cooperative for mutual financial assistance, the society for mutual financing of small and/or medium-scale businesses may extend microloans only to the parties which/who are the members of such cooperative, society respectively, and may extend loans to the tier-two consumer cooperative of which such cooperative, society is a member.

  1. A legal entity shall be deemed a microfinance organization and shall be entitled to be engaged in regular microloan extending from the day of entering thereof into Register by the National Bank.

for entering into the Register, the following shall be submitted by the legal entity to the National Bank:

an application on entering such legal entity into the Register, according to the form established by the National Bank;

a copy of the statute of the legal entity;

a copy of the document confirming that the authorized capital of the legal entity has been formed (if such legal entity is a profit-making organization);

copies of documents evidencing of compliance of the legal entity’s head with the qualification requirement and requirements to business reputation applied to a head of a microfinance organization in accordance with Parts three and four of this Clause;

the profit and loss statement or other documents, if the legal entity keeps the ledger of income and expenditure of organizations and individual entrepreneurs applying the simplified tax system; income statement for the past calendar year of activity (if the legal entity has carried out its business within the mentioned period).

The qualification requirement applied to the head of amicrofinance organization shall be a university-level degree in jurisprudence or economy or other university-level degree subject to advanced training similar to standards of higher education in jurisprudence or economy.

Business reputation requirements applied to the head of a microfinance organization shall be the following:

non-existence of unquashed or outstanding convictions for crimes against property and procedures for business activities;

non-existence (within the past two years) of facts of labour agreement (contract) termination at the employer’s initiative due to the person’s wrongful acts which are the grounds of loss of confidence in him/her from the part of the employer;

unavailability of facts of wrongful acts causing bankruptcy of a legal entity, which fact has been established by valid judgment;

unavailability of the prosecuting authority’s order on institution of criminal proceedings against the person or on indictment as a suspect or a defendant in a criminal case.

Should the legal entity fail to submit all documents mentioned inPart two of this Clause, the National Bank shall refuse to accept the application.

The National Bank shall examine the documents submitted by the legal entity for entering into the Register and shall make a decision on entering (non-entering) of such legal entity into the Register within 15 business days from receipt of the documents mentioned in Part two of this Clause.

Entering or non-entering of the legal entity into the Register shall be confirmed by the certificate of entering into the Register of microfinance organizations issued by the National Bank in the form prescribed by the same. No payment for examination of documents and entering into the Register shall be collected.

The National Bank shall refuse to enter the legal entity into the Register on the occurrence of any of the following:

the documents mentioned in Part two of this Clause, submitted by the legal entity, fail to comply with the requirements of the legislation, are forged or falsified or invalid and/or contain unreliable information;

the head of the legal entity fails to meet the qualification requirement and/or requirements to business reputation applied to a head of a microfinance organization;

the legal entity fails to comply with the requirement of the amount of the authorized capital as of the day of application submission (if such legal entity is a profit-making organization);

the legal entity has failed to gain profit from its activities during the part calendar year (if the legal entity has carried out its business within the mentioned period);

the legal entity has been earlier removed from the Register by the National Bank for repeated (two or more times during a calendar year) non-fulfillment (or late fulfillment) of any regulation and/or request of the National Bank, and less than one year has lapsed from removal of such microfinance organization from the Register.

The microfinance organization shall be subject to removal from the Register by the National Bank on the occurrence of any of the following:

upon the application of the microfinance organization;

in the event of removal of the legal entity which is a microfinance organization from the Unified State Register of Legal Entities and Individual Entrepreneurs;

in the event of repeated (two or more timed during a calendar year) non-fulfillment (or late fulfillment) of any regulation and/or request of the National Bank. On this ground, the National Bank may remove the microfinance organization from the Register for the period up to one year. Upon expiration of the mentioned period the legal entity removed from the Register may apply to the National Bank for entering it into the Register in accordance with the procedure established by this Edict.

  1. Microfinance organizations shall be engaged in regular microloan extending subject to the following conditions:

the microloan shall be extended on the grounds of the microloan agreement which is a type of a loan agreement, under which terms and conditions one party (the creditor) shall transfer to the other party (the borrower) monetary funds in the amount not exceeding 15000 base values as of the date of signing such agreement, and the borrower shall undertake to repay the same amount of monetary funds and pay interest on such funds;

microloans shall be extended on the basis of microloan regulations approved by the microfinance organization, which regulations shall comply with the content requirements set forth by the National Bank. The microfinance organization shall publicly display such microloan regulations in the place accessible for persons interested in attracting microloans and borrowers (hereinafter “the Consumers”) and post the same on its official web-site (if any) in the Internet.

No microloan may be extended by the microfinance organization to the microloan(s) borrower if the total amount of liability of such borrower to the microfinance organization under microloan agreements signed when extending such microloan(s) exceeds 15000 base values as of the day of signing the microloan agreement.

  1. Apart from essential terms and conditions specified in accordance with the legislation, the following shall be the essential terms and conditions of a microloan agreement:

the rate of interest year on year (annual interest rate) on the microloan payable by the borrower to the creditor, and procedure of its quoting;

the borrower’s right to early repayment of the microloan at its/his own discretion and procedure of such early repayment;

indication of the borrower’s status giving the right to apply for the microloan with due regard for requirements provided for by Part two, paragraphs two to four of Part three in Sub-clause 3.2 Clause 3 of this Edict.

The microloan agreement shall not include the following terms and conditions:

on any additional payments (commission and others) for use of the microloan collected by the microfinance organization from the borrower;

on unilateral change, by the microfinance organization, of annual interest rate on the microloan payable by the borrower to the creditor and/or procedure of quoting such interest rate, or of the amountof a forfeit (penalty, fee) under the agreement, and of duration of such agreements;

on application of a forfeit (penalty, fee) to the borrower for early repayment of the microloan.

The amount of a forfeit (penalty, fee) under the microloan agreement may not exceed the amount of such microloan extended by the microfinance organization to the borrower.

  1. The microfinance organization shall:

in accordance with the procedure established by the National Bank, and prior to microloan extendingprovide the parties interested in microloan attracting and the borrowers with complete and reliable information on terms and conditions of the microloan agreement, possibility and procedure of changing such terms and conditions at the initiative of the microfinance organization and/or the borrower, procedure and conditions of microloan extending, borrower’s rights and obligations arising from microloan attracting, the rate of interest year on year (annual interest rate) on the microloan payable by the borrower to the creditor, and procedure of its quoting, list and amount of payments related to breach of terms and conditions of the microloan agreement, procedure of early microloan repayment at the discretion of the borrower;

form the borrower’s credit file (documents and information submitted by the borrower in accordance with the microloan regulations and signed microloan agreements, put together by the microfinance organization for each borrower);

keep the borrower’s credit file at least for three years from the date when all obligations under the microloan agreement have been fulfilled by the parties;

when and as provided by the National Bank, submit to the National Bank the accounts and other information for the purpose of generation of financial statistics and control of compliance of microfinance organizations with the legislation governing the procedure of microloan extending and attracting;

fulfill any other obligations determined by the legislation.

In addition to obligations provided for by Part one of this Clause, the non-profit microfinance organization established in the form of a consumer cooperative shall comply with financial ratios established by the National Bank in accordance with Part four of this Clause, and shall create the following funds and reserves:

the share fund formed at the expense of share contributions;

the mutual assistance fund formed for microloan extending to its members and to the tier-two consumer cooperative of which such organization is a member, at the expense of resources raised under loan agreements (microloan agreements including), resources of the share fund and other funds formed by the consumer cooperative, undistributed profits remaining after taxation for the preceding calendar years, current year earnings (profits), money raised from other sources;

the bad debt reserve formed at the expense of deductions from net profit;

the reserve for probable losses on microloans, formed at the expense non-operating expenses of the consumer cooperative recorded for taxation purposes;

other funds formed in compliance with the legislation, the Statute, decisions of the general meeting of the consumer cooperative, at the expense of deductions from net profit.

The minimum amounts of funds and reserves formed in accordance with paragraphs two to five in Part two of this Clause, procedure of formation thereof shall be specified by the National Bank.