Bishkek
July 23, 2002, # 124
THE LAW OF THE KYRGYZ REPUBLIC
On Micro-finance organizations in the Kyrgyz Republic
(As amended by the Laws of the Kyrgyz Republic of December 1, 2005 #157, March 27, 2009 #87, October 6, 2012 #169, April 26, 2013 #60)
CHAPTER 1. GENERAL PROVISIONS
CHAPTER 2. MICRO-FINANCE COMPANIES
CHAPTER 3. LICENSING OF ACTIVITY OF MICRO-FINANCE COMPANY
CHAPTER 4. REGULATION OF THE ACTIVITY OF MICRO-FINANCE COMPANY
CHAPTER 5. MICRO-CREDIT COMPANIES AND MICRO-CREDIT AGENCIES
CHAPTER 5-1. PROTECTION OF CONSUMER RIGHTS AND RESPONSIBILITIES
OF MICRO-FINANCE ORGANIZATIONS
CHAPTER 6. CONCLUDING PROVISIONS
This Law outlines the status, regulates the activities of the micro-finance organizations and is purposed to create the legal and organizational prerequisites for micro-finance activities in the Kyrgyz Republic.
CHAPTER 1
GENERAL PROVISIONS
Article 1. Definitions
1. A micro-finance organization is a specialized finance and credit or lending institution (micro-finance company, micro-credit company, micro-credit agency), established as a legal entity with the purpose to provide micro-credits to certain categories of individuals and legal entities.
A micro-finance organization carries out its activity on the basis of license (certificate) from the National Bank of the Kyrgyz Republic (hereinafter - the National Bank). A micro-finance organization is not a bank and may carry out specific bank transactions in compliance with requirements of this Law.
2. A micro - finance company is a specialized finance and credit institution established in the form of a joint stock company and providing micro-credits to certain categories of legal entities and individuals from its own funds, as well as borrowed funds, including funds from legal entities and individuals, and other types of, provided in this Law transactions, including time deposits from physical and legal entities in compliance with this Law.
3. A micro-credit company is a specialized credit institution, established as a legal entity in any organizational and legal form of a commercial organization that has obtained a National Bank certificate and extends micro-credits to individuals and legal entities only from its own funds or funds of individuals and legal entities in compliance with this Law.
4. A micro-credit agency is a specialized credit institution, established as a non-commercial organization, except for the cases, provided in this Law, that has obtained a National Bank certificate and extending micro-credits to individuals and legal entities only from its own funds or funds of individuals and legal entities in compliance with organization goals outlined in its Charter.
5. An affiliated person of a micro-finance organization is any individual (insider) or legal entity (except for state bodies that control its activity within the terms of their references and authorities) that has the right to directly or indirectly determine decisions or influence the decision making by a micro-finance organization in entering into agreements (including oral agreement) or any other transaction and any individual (insider) or legal entity through which this affiliated entity has the same right. Affiliated persons of a micro-finance company include its executive officers, shareholder (participant) or any entity, holding five and more percent of voting shares.
6. Micro-credits are monetary funds, provided by micro-finance organizations in accordance with their Charter to individuals, or societies or legal entities established by the micro-finance organization. The amount of any loan to be disbursed to one and the same entity may not exceed the maximum allowed loan size set out by the National Bank.
7. Micro-finance activities are activities of micro-finance organizations on delivering micro-credits in accordance with this Law.
8. Extension of a micro-credit is formalized by the Credit Agreement or by the Loan Agreement in compliance with requirements of legislation, and under subsidiary responsibility of group of persons.
9. The activities of other finance and credit institutions, including credit unions, are regulated by the Law "On credit unions" and other normative legal acts of the Kyrgyz Republic.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 2. The goal of a micro-finance organization
The goal of micro-finance organizations activities is to provide accessible micro finance services to alleviate poverty, increase employment, assist in development of entrepreneurship and social mobilization of population in the Kyrgyz Republic.
In this case, the micro-finance organization may pursue different objectives and defined by its constituent documents do not contradict the current legislation of the Kyrgyz Republic.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 3. Name of a micro-finance organization
1. A micro-finance organization shall use only the name, which is outlined in the Charter of the microfinance organization and depending on its type, use in its name the words "micro-finance company", "micro-credit company", "micro-credit agency" and short names "MFC", "MCC", "MCA" respectively.
2. A micro-finance organization cannot use a name different from that outlined in its Charter in any of its documents, announcements or advertising material.
3. A micro-finance organization does not have the right to use in its name or logo the words "National", "State", "Kyrgyz Republic", "Kyrgyzstan", in any language and in any combination.
4. The terms of micro-finance company, micro-credit company, micro-credit agency or abbreviations MFC, MCC, MCA or any other words in combination with these terms can be used in the brand name or with the purpose to advertise a micro-finance organization that acts in compliance with its license or certificate within the framework of this Law.
5. A change in the name and location of a micro-finance organization is completed when preliminary notification has been given to the National Bank through provision of confirming documents, also a micro-finance organization is obliged within three days to publish it in the Mass Media.
6. It is not allowed to use as a name that are identical or similar to the point of confusion with the name of the previously created or established in the territory of the Kyrgyz Republic of banks or micro-finance institutions.
This prohibition does not apply to subsidiaries or affiliated micro-finance institutions in their use of names of major banks (parent) or micro-finance institutions (parent).
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 4. Separation of responsibility between the Kyrgyz Republic and micro-finance organizations
1. Micro-finance organizations are not responsible for liabilities of the Kyrgyz Republic and the Kyrgyz Republic is not responsible for liabilities of micro-finance organizations except for the cases, when parties voluntarily accept such liabilities.
2. Micro-finance organizations are not responsible for liabilities of the National Bank and the National bank is not responsible for liabilities of micro-finance organizations.
Article 5. Independence of micro-finance organizations in the Kyrgyz Republic
1. Micro-finance organizations independently organize and carry out their activities within their terms of reference or authorities, outlined in this Law, the Law "On Banks and Banking Activity in the Kyrgyz Republic", normative legal acts from the National Bank and other laws of the Kyrgyz Republic.
2. It is prohibited for state power and government authorities and their executive officers to interfere in any form in any decision associated with the activity of micro-finance organizations, except for cases outlined by legislation of Kyrgyz Republic.
3. Micro-finance organizations independently set their interest rates, commission (processing) fees and service fees in accordance with agreements concluded with their clients.
Article 6. Unions of micro-finance organizations
1. For the purpose of coordination of their activities, protection and representation of common interests, implementation of joint projects and other similar purposes, micro-finance organizations may establish associations or other similar unions, the membership of which may include, in addition to micro-finance organizations, foreign citizens and legal entities or individuals and legal entities that are citizens of Kyrgyz Republic.
2. Associations or other relevant unions of micro-finance organizations shall meet the requirements of antimonopoly legislation. Any use by micro-finance organizations of association, other relevant unions for the purpose of setting interest rates, commissions or fees (dues) aimed at restriction of competition or monopolization of the market shall be prohibited.
Article 7. Branches and representative offices of micro-finance organizations
1. A branch of a micro-finance organization is a separate subdivision, not itself a separate legal entity that has a different location and carries out all and/or part of transactions in accordance with the micro-finance organization's by laws and acts within the terms of references given by the micro-finance organization.
A branch shares the micro-finance organization's seed capital, balance sheet and name that fully correspond with the name of micro-finance organization by adding only the word "Branch".
Branch managers are appointed by the micro-finance organization that established it and act on the basis of a duly authorized Power of Attorney issued to them.
2. Representative office of the micro-finance organization is a separate subdivision, not itself a legal entity, that protects and represents the interests of the micro-finance organization and concludes deals on behalf of micro-finance organization or other legal actions according to representative office by laws approved by micro-finance organization.
3. Branch and/or representative office of the micro-finance organization opens after preliminary notification to the National Bank of the procedure for opening branches and representative offices of a micro-finance organization is outlined in the normative legal acts of the National Bank.
4. Branches and representative offices are not subject to registration by local governmental bodies except for registration of the branch and/or representative office in justice bodies.
5. Change of name, location, types of activity of a branch and/or representative office of a micro-finance organization can be made after notification to the National Bank.
6. The National Bank has the right to require information and issue regulations pertaining to the activity of branches and representative offices of micro-finance organizations.
7. The actions of branch and/or representative office of micro-finance organization are considered to be actions of the micro-finance organization, the micro-finance organization that established it is fully liable for the actions of each branch and/or representative office of the micro-finance organization.
8. The activities of branches and representative offices of micro-finance organizations in foreign countries is based on the laws of the country in which they are opened, and / or relevant international agreements entered into with the law in force, ratified by the Kyrgyz Republic.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60).
Article 8. Transactions, executed by micro-finance organizations
1. Besides main micro-credit activity, a micro-finance organization has the right to conclude other transactions to ensure its activities comply with the legislation of the Kyrgyz Republic, in particular:
1) Repossess and sell pledged property to fulfill client liabilities to the micro-finance organization;
2) Provide consultations and information on micro-credit services;
3) Open and maintain settlement (deposit) accounts with commercial banks;
4) Borrow funds from legal entities;
5) Borrow funds from founders (shareholders) within the restrictions, established by the National Bank;
6) Carry out operations with derivative financial instruments subject to the restrictions set by the National Bank.
2. A micro-finance organization can procure, own, use, dispose of property in compliance with restrictions outlined in this Law, in relevant legislation of the Kyrgyz Republic and in its Charter, and conduct other transactions, related to the provision of micro-finance services to ensure its activity is in compliance with legislation of the Kyrgyz Republic.
3. Micro-credits, issued to clients by a micro-finance organization, may be secured by collateral, guarantee, various financial instruments or other means in compliance with legislation of the Kyrgyz Republic.
4. Micro-finance organizations are not eligible to:
1) issue sureties and guarantees, except for the issue of guarantees by micro-finance companies in accordance with this Law;
2) carry out other banking operations and transactions as defined by the legislation of the Kyrgyz Republic, except for operations and transactions provided for in this Law;
3) carry out professional activities in the securities market.
5. Features of legal regulation of micro-finance organizations, operating in accordance with the Islamic principles of banking and financing, established by normative legal acts of the National Bank.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60).
Article 9. Activity of micro-finance organizations
1. To carry out its activity, a micro-finance company is obliged to obtain a license from the National Bank for the right to carry out specific banking transactions in compliance with the requirements of this Law and normative legal acts of the National Bank.
2. To carry out its activity, a micro-credit company and/or micro-credit agency is obliged to obtain a certificate from the National Bank of registration of the micro-credit company and/or micro-credit agency. A certificate of registration is issued to micro-credit companies and micro-credit agencies in simplified form as outlined in the regulations of the National Bank.
3. Micro-finance organizations, their branches and representative offices at the location should have a sign with the mention of its name. The names of branches and representative offices must match the name of the head organization. If you change the location of micro-finance organizations and their branches and representative offices the micro-finance organizations must promptly notify the authorized state registration authorities and the National Bank.
4. Compliance with the Antitrust Law in respect of micro-finance organizations operating in accordance with this Law is controlled by the National Bank, which for this purpose may issue and enforce normative legal acts necessary for the execution.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 10. Reorganization and/or liquidation of micro-finance organizations
1. A micro-finance organization may be reorganized by decision of its founders (participants) or the body of a legal entity authorized by the constituent documents, or by the decision of the National Bank in compliance with the legislation of the Kyrgyz Republic.
2. A micro-finance organization may be liquidated by the decision of its participants(shareholders) in accordance with the legislation of the Kyrgyz Republic, with an MFI should pass the original license or certificate to the National Bank on time and terminate the implementation of the operations, specified in the license and / or certificate of the decision on liquidation.
Responsibility for the liquidation of the micro-finance organization, including the revocation of the license and the certificate of the micro-finance organization by the National Bank, except as provided in paragraphs 4 and 5 of this Article shall be borne by the participants (shareholders) or to the management body which is authorized to liquidate by the charter of the micro-finance organization.
3. In case of a micro-credit agency liquidation all property that remains after settling creditor claims is distributed according to the charter goals of the non-commercial organization.
4. In case of default (bankruptcy) a micro-finance organization is liquidated as a bank in compliance with legislation on bankruptcy of the Kyrgyz Republic.
5. The liquidation of micro-finance companies eligible to receive time deposits shall be in accordance with the legislation of the Kyrgyz Republic on the liquidation and bankruptcy of banks.
(As amended by the Laws of the Kyrgyz Republic of December 1, 2005 #157, April 26, 2013 #60)
Article 11. Reserves of micro-finance organization
1. A micro-finance organization classifies its assets and credit portfolio, creates loan loss reserve in compliance with normative acts issued by National Bank.
2. Creation of Loan Loss Reserve, write off of debts and losses, as well as corrections to Loan Loss Reserve are carried out in accordance with normative acts of the National Bank.
On general principles of classification of assets and create reserves to cover potential losses and damages by the micro-finance organizations, see the Temporary Regulations, approved by the Decree of the Board of the National Bank of the Kyrgyz Republic of October 22, 2003 #31/3.
3. Expenditures for creating Loan Loss Reserve are considered to be expenses of a micro-finance organization that are deductible from taxable base in compliance with tax legislation of the Kyrgyz Republic.
CHAPTER 2
MICRO-FINANCE COMPANIES
Article 12. Organization and legal form of a micro-finance company
1. A micro-finance company is established as a joint stock company of open or close type and acts on the basis of its charter, in compliance with the requirements of this Law and other normative legal acts of the Kyrgyz Republic.
2. All activity of micro-finance company is subject to restrictions outlined in this Law and normative acts, issued by the National Bank in accordance with this Law.
3. All changes and amendments to the Charter and other formation documents of the micro-finance company shall be registered according to the legislation of the Kyrgyz Republic. Changes and amendments to the Charter and formation documents shall be approved by the National Bank prior to their registration in justice bodies.
4. In case of changes and amendments to charter and/or establishment documents of micro-finance company pertaining to the size of charter capital, the micro-finance company shall notify the National Bank on outcomes of final registration of emission of securities in compliance with legislation on securities within one month from the date emission was declared to be held.
Article 13. Micro-finance company, its founders and shareholders
1. Founders and shareholders of a micro-finance company may be individuals or legal entities - residents or non-residents of the Kyrgyz Republic provided that the share of a legal entity, when aggregated with the share of any other legal entity controlling, controlled by or under common control with it, may not exceed 20 percent of the voting shares of the micro-finance company. This restriction does not apply to the legal entity engaged in banking and / or financial activities, as well as for foreign non-profit organization in compliance with the requirements of the National Bank.
2. It is not allowed as founders or shareholders (participants) of the micro-finance company an entity corresponding to one or more of the following characteristics:
1) financial insolvency (bankruptcy) of the founder or shareholder (participant);
2) existence of a criminal record in the field of financial and economic crimes of the founder or shareholder (participant) is not withdrawn and not repaid in accordance with legislation of the Kyrgyz Republic;
3) presence of a court decision, prohibiting the founder or shareholder (participant) to conduct banking activity;
4) legal entities, registered in offshore zones or having as members of persons and / or affiliated entities registered in offshore zones, or individuals living in the offshore areas, the list of which is set by the National Bank;
5) individuals who are residents of offshore zones residing in offshore areas, the list of which is set by the National Bank;
6) legal entities, registered or having as members of persons and / or affiliates, registered in states that do not apply the recommendations of international organizations in the development and implementation of international standards to anti-money laundering and anti-terrorist financing and are not involved in international cooperation in the field of anti-money laundering and anti-terrorist financing or individuals residing in these states, the list of which is established by the authorized body of the Kyrgyz Republic in the field of anti-money laundering and anti-terrorist financing;
7) individuals who are residents and / or residing in states that do not apply the recommendations of international organizations in the development and implementation of international standards to anti-money laundering and anti-terrorist financing and are not involved in international cooperation in anti-money laundering and anti-terrorist financing, the list of which is established by the authorized body of the Kyrgyz Republic in the field of anti-money laundering and anti-terrorist financing;
8) legal entities, registered or having as participants of persons and / or affiliates, registered in states that have decisions (resolutions) of international organizations to which jointed the Kyrgyz Republic, the application of sanctions to include a prohibition and / or restrictions on cooperation with individuals and legal entities from these states. The authorized state body in the sphere of foreign affairs and other public authorities of the Kyrgyz Republic provides on request of the National Bank of the available information on international sanctions;
9) individuals who are residents and / or residing in the territory of the state in respect of which taken decisions (resolutions) of international organizations to which jointed the Kyrgyz Republic, the application of sanctions to include a prohibition and / or restrictions on cooperation with individuals and legal entities from these states. The authorized state body in the sphere of foreign affairs and other public authorities of the Kyrgyz Republic provides on request of the National Bank of the available information about international sanctions.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 14. Capital of micro-finance company
1. Fully paid charter capital shall form the basis of the capital of the micro-finance company. The capital includes only charter capital on which the micro-finance company does not have any obligation to repay funds contributed by its founders, shareholders;
2. The charter capital of the micro-finance company may be formed only in national currency of the Kyrgyz Republic using the funds of founders (shareholders). Use of fixed assets and intangible assets for formation of charter capital of micro-finance companies shall not be allowed.
3. Before obtaining a license the micro-finance company is obliged to place minimum charter capital into accumulation account, opened in a commercial bank of the Kyrgyz Republic. The requirement to enter the minimum share capital for the accumulation account in the commercial bank does not apply to micro-credit companies, which transform into micro-finance companies and have capital in the amount established by the legislation of the Kyrgyz Republic, and past audit demands made by the National Bank. If the size of the charter capital of micro-credit company, which is transformed to a micro-finance company, is less than the amount established by the National Bank, its shareholders must pay the remaining amount in the accumulation account in the commercial bank. From the National Bank can be made a special inspection to form the charter capital of the micro-credit companies for approval of compliance with the requirements for minimum charter capital.
4. The National Bank determines the calculation base for defining the capital adequacy standard and minimum size of the charter capital for newly established micro finance companies and capital the structure for a micro-finance company.
5. The size of the charter capital for a micro-finance company shall not fall below the minimum requirements set forth in the regulations of the National Bank.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 15. Additional provisions for licensing a micro-finance company
A micro-finance company, which claims to obtain a license (instructions in the license), the right to attract the deposits on its behalf on the terms agreed with the depositor, in addition to the documents specified in Article 23 of this Law, shall submit the documents provided by the Law of the Kyrgyz Republic “On Banks and Banking activities in the Kyrgyz Republic” for obtaining a banking license. At the same facilities and equipment of the micro-finance companies must comply with the requirements, established by the National Bank, to ensure the safety of depositors' funds.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 16. Transactions, carried out by a micro-finance company
1. A micro-finance company may carry out the following banking operations taking into account the limitations, set by the National Bank, under condition that these operations are indicated in the license:
1) Issue secured and non-secured micro-credits
2) Accept time deposits from individuals and legal entities on conditions of repayment with the purpose of accumulating client savings.
3) Buy and sell debt liabilities (factoring);
4) (Null and void in accordance with the Law of the Kyrgyz Republic of October 6, 2012 #169)
5) Implementation of retail banking services under the agency agreement with the bank - without opening accounts for clients in the micro-finance company;
6) The issuance of guarantees in the amount not exceeding in the aggregate with the micro-credit (leasing) of maximum amount of loans per borrower.
1-1. In the presence of an additional license (instructions in the license) of the National Bank the micro-finance company may exercise all or any of the operations, listed in paragraphs 1-3 and 6 of paragraph 1 of this article, in foreign currency, as well as the purchase and sale of foreign currency on its own behalf. In this case, the National Bank may establish requirements for micro-finance companies to obtain an additional license.
1-2. The borrower (lessee), or a group of borrowers of micro-finance companies can make payments in satisfaction of micro-credit (leasing) in both the foreign and local currency to the extent to which micro-credit received in foreign currency, including payments on the principal amount of the micro-credit, interest and (or ) other fees associated with the repayment of microcredit. With payment in local currency to repay the microcredit (leasing) the borrower (lessee, or a group of borrowers carry out according to the official foreign exchange rate on the payment date, determined in accordance with the legislation of the Kyrgyz Republic, unless a different rate is set by the agreement.
2. Within the initial two years from the start of its activity the micro-finance company may not obtain the right to engage in transactions, indicated in paragraph 2 of clause 1 of this article except in the following cases:
1) If the organization carried out its activity before this law came into force and legally accepted deposits, issued credits within two years before obtaining this license, and changes its organization and legal form to obtain the license as a micro-finance company and on condition that the National Bank will be satisfied that it is the same entity that carried out the activity previously;
2) When the entity, established as a credit union in compliance with Law of the Kyrgyz Republic "On Credit Unions" actively, acts and accepts deposits on a mutual basis and issues credits within two years from the moment this law comes into force and changes its organizational and legal form to that of a joint stock company with the purpose of obtaining a license as a micro-finance company and on condition that the National Bank is satisfied that it is the same entity that carried out the activity previously;
3) When the entity, established as a micro-credit company or agency, has been working for two years on the base of a certificate issued by the National Bank and meets the qualification and other requirements of the National Bank in order to obtain the license for accepting time deposits;
3. Micro-finance organizations may not obtain the right to carry out transactions, indicated in sub clause 2 of clause 1 of this article, even if they meet the requirements of item 2 of this Article, if:
1) They are declared bankrupt and are the subject to liquidation and/or reorganization;
2) Available preventive measures and sanctions of the National Bank, as well as they made other violations of the National Bank normative documents;
3) There is an outstanding court decision, prohibiting engagement in this type of activity.
4) Do not meet the qualification criteria and other requirements of the National Bank in order to obtain a license for accepting time deposits.
4. A micro-finance company has the right to issue common shares and debt securities within the limits, permitted by the National Bank and relevant legislation of the Kyrgyz Republic.
5. National Bank issues normative acts, defining limitations for micro-finance company including:
1) On procedures for operating with deposits;
2) On utilization of deposits of physical entities for on-lending;
3) On the size of deposits;
4) On compliance with obligatory reserve requirements; or
5) On the amount of investments;
6) On issue of guarantees and other.
6. A micro-finance company may carry out financial leasing transactions.
7. A micro-finance company has no right to conduct banking operations, not provided for in this Article.
(As amended by the Laws of the Kyrgyz Republic of October 6, 2012 #169, April 26, 2013 #60)
Article 17. Placement of funds
1. The placement of funds of a micro-finance company shall be carried out in accordance with the internal credit policy of the micro-finance company that is subject for approval by the relevant management body for the purposes, determined by this Law.
2. A micro-finance company shall not issue credit to any third party to purchase securities, issued by the micro-finance company itself or as a security for such purposes.
3. Micro-finance company has no right to issue letters of credit and carry out operations with precious metals and property trust.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 18. Resolution of conflicts of interests
1. In order to avoid any conflict of interest, a member of the Board of Directors of a micro-finance company shall:
1) Act in the interests of the micro-finance company, take efforts to protect the interests of the micro-finance company and make reasonable and sound decisions while performing his/her responsibilities and bear material responsibility for losses, incurred by micro-finance company as a result of poor performance of responsibilities.
2) Cannot be simultaneously a member of the Board of Directors or Board or employee of any other affiliated company of micro-finance company, operating in Kyrgyz Republic.
3) Shall not simultaneously hold the position of executive officer or employee in any state body, including local authorities.
4) Shall not take part in voting on issues, or in any way influence voting that is of personal interest.
2. Board member of a micro-finance company shall act in the interests of the micro-finance company and not in his or her personal interests and take the best possible efforts to protect interests of micro-finance company and also make reasonable and sound decisions while performing his or her responsibilities and bear material responsibility for losses incurred by micro-finance institutions as a result of poor performance of responsibilities.
Article 19. Transactions with affiliated persons
1. Any transaction between the micro-finance company and any affiliated person is subject for approval by the Board of Director of micro-finance company. The National Bank shall adopt normative acts towards the requirements for transactions between micro-finance company and affiliated person.
2. Micro-finance company may participate in transactions on assets placement with affiliated person on condition that:
1) the total amount of transactions towards any affiliated person shall not exceed the identified percentage ratio to capital and reserves of micro-finance company (as outlined in normative legal acts, issued by National Bank);
2) the gross amount of all these transactions shall not exceed the identified percentage ratio to capital and reserves of micro-finance company (as outlined in normative acts issued by National Bank).
3. In any cases in which the transactions between the micro-finance company and affiliated person are involved, when the Board of Directors refuses to vote or is unable to make a decision on this issue, the Board may by majority of votes make a decision to transfer this issue for consideration at the next General Assembly of shareholders or Annual meeting of shareholders.
4. A micro-finance company issues micro-credits and carries out other transactions in favor of affiliated persons of micro-finance company in compliance with requirements, set forth in normative acts of the National Bank.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 20. Qualification of the Board of Directors members and executive officers of a micro-finance company
1. The National Bank has the right to adopt normative acts, setting out qualification requirements for the following positions in a micro-finance company that attracts deposits: Board of Directors members, Board members, managers of large structural divisions and chief accountant.
2. Board of Directors members, Board members of micro-finance company that attracts deposits shall have relevant professional qualification and good reputation.
See:
Decree of the Board of the National Bank of the Kyrgyz Republic of February 8, 2006 #4/2 “On approval of the Regulations on minimum qualification requirements for officers of micro-finance companies licensed by the National Bank of the Kyrgyz Republic”
Article 21. Procedure for changes in composition of shareholders of micro-finance company
1. Any individual or legal entity that wishes to acquire a package of shares of a micro-finance company that gives a controlling interest, whether directly or indirectly or jointly with other persons or unions, is obliged to submit an application in writing to National Bank thirty days prior to the date of acquisition of the shares.
In this article acquisition applies to purchase, transfer, pledging or any other form of transfer of ownership or control of shares of the micro-finance company.
In this article control implies the ability to control directly or indirectly elections of a majority of members of the Board of Directors in the micro-finance company or to otherwise influence management of the micro-finance organization. Control may be fulfilled through ownership of five or more percent of shares of any type issued by the micro-finance company with voting right or other way of influencing management decisions.
2. Applications for the acquisition of shares, as indicated in clause 1 of this article, shall be submitted by the persons that become direct or indirect owners of a controlling interest in the stock as a result of a supplementary acquisition of shares of the micro-finance organization.
3. No later than thirty days from the date of receipt of the application or within sixty days in case of acquisition of shares by a non-resident, the National Bank notifies the applicant in writing of its decision (approval or denial). Denial shall be explained. In case if the National Bank did advise its decision within the indicated period, the acquisition of the shares of the micro-finance company is considered to be permitted.
4. Within the terms of its supervisory functions the National Bank may request and obtain information on the financial condition and business reputation of shareholders of a micro-finance company in case of their acquisition of more than five percent of stock.
5. The National Bank may deny the application if:
1) Acquisition of the stock may lead to a monopoly;
2) The financial condition of the acquiring parties may threaten stability of the micro-finance company;
3) Competence, experience and qualifications of the proposed management do not meet the statutory requirements;
4) The acquiring parties did not submit complete information or submitted distorted or false information;
6. The process for submission and consideration of applications is regulated by the National Bank.
Article 22. Transparency of a micro-finance company activity
A micro-finance company publishes in the mass media balance reporting with explanations on this reporting at least once a quarter and annually publishes financial statement confirmed by independent External Auditor.
CHAPTER 3
LICENSING OF ACTIVITY OF A MICRO-FINANCE COMPANY
Article 23. Documents, required for obtaining a license
1. To obtain a license for carrying out transactions by a micro-finance company, the applicant shall submit two copies of the following documents to the National Bank:
1) Application for the license completed in compliance with the form, prescribed by regulations of the National Bank.
2) Notarized copies of formation documents of the micro-finance company;
3) General organizational chart of the micro-finance company;
4) Copy of the certificate of state registration as a legal entity;
5) List of the members of management bodies of the micro-finance company and data, confirming their qualification fitness verified by the National Bank;
6) Document, confirming the payment of the license issuance fee;
7) Document, confirming deposit of funds as a charter capital of a micro-finance company to a clearing account in a commercial bank.
8) Feasibility Study (business plan) for the establishment of the micro-finance company;
9) Information to help determine the source of funds of the founders, contributed as capital of the micro-finance company.
2. The National Bank has the right to determine additional information that the applicants shall submit to obtain a license.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60).
Article 24. Terms of consideration of a license application
1. The National Bank shall issue a license or deny the license application within two months after receiving the application and all required documents for a micro-finance company. During this time it is not included a registration (re-registration) of a micro-finance company in the authorized state authority, responsible for the registration of legal entities.
2. An affirmative reply shall be a letter of consent to undergo state registration (re-registration) in justice bodies of the Kyrgyz Republic in form and substance determined by the National Bank and the Ministry of Justice of the Kyrgyz Republic for finance and credit institutions licensed by the National Bank.
3. In the event of any change to any of the information, submitted to the National Bank, the applicant shall immediately notify the National Bank and shall submit to the National Bank documents with changes within 3 days from the moment the changes were made. The National Bank may extend the period of review for 10 working days. If the National Bank considers that the change in information is essential, it may restart the period of review from the day of receipt of the notification of changes in the initial information.
4. If the documents, received by the National Bank, do not comply with the requirements of the National Bank for obtaining a license, the calculation of the review period shall start as of the date of receipt of satisfactory documents.
5. In case of denial of the issuance of a license to a micro-finance organization or withdrawal of a license application by founders of a micro-finance organization, one copy of the documents, submitted for obtaining the license, is not subject for return.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 25. Grounds for denial of a license
1. The National Bank may deny issuance of a license for any of the following reasons:
1)Non-compliance of submitted documents with requirements of this Law and requirements of the legislation of the Kyrgyz Republic;
2)Provision of false information in license application documents;
3)Failure to pay the license issuance fee;
4)Court decision in respect of the applicant, forbidding him/her to carry out this type of activity;
5)Non-compliance with other provisions, set out in regulations, issued by the National Bank pursuant to this Law.
6)Other reasons, determined by this Law and legal acts of the Kyrgyz Republic.
2. The National Bank must provide the applicant with written notification, setting forth the reasons based on which it has denied issuance of license.
Article 26. Change of information in documents after obtaining a license
1. Prior approval of the National Bank is required for the following additions or changes in information, submitted for obtaining a license and establishing of a micro-finance company:
1) Any amendments in the founding documents of the micro-finance company;
2) Any changes in any other documents or information, which was required to be included in the list of documents for obtaining a license;
3) Changes in the composition of the management body of the micro-finance company;
4) Other changes, specified in regulations issued by the National Bank.
2. The National Bank issues its approval or denial to the proposed amendments or changes within 15 business days after receiving notification on the proposed amendments and changes;
3. Any proposed change or amendment may be denied by the National Bank on the same basis as applied for denial of issuance of a license.
CHAPTER 4
REGULATION OF THE ACTIVITY OF MICRO-FINANCE
ORGANIZATIONS
See also:
Temporary Rules, regulating the activities of micro-finance companies in the Kyrgyz Republic, approved by the Decree of the Board of the National Bank of February 19, 2003 #4/2
Article 27. Regulatory and supervisory body
1. The National Bank regulates and supervises the activity of micro-finance companies with the purpose to perform functions and tasks, delegated to the National Bank by Law “On the National Bank of the Kyrgyz Republic”, and to support a sustainable financial system, protect consumers' interests and ensure compliance of micro-finance organizations with relevant legislation of the Kyrgyz Republic.
2. The National Bank issues regulations that regulate the activity of micro-finance organizations in addition to provisions of this Law that also considers the issues of prudent regulation, including:
1) minimum size of charter capital;
2) structure and composition of capital;
3) classification of assets and creation of Loan Loss Reserve;
4) other economic norms (capital adequacy, maximum loan size per borrower, liquidity, etc.).
5) limitations and operating rules for deposit activities;
6) procedures for complying with obligatory reserve requirements.
3. Specific authorities of the National Bank related to regulation and supervision of micro-finance organizations, including development of draft regulations may be delegated by the National Bank to an authorized person.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 28. Means of regulation applied by the National Bank
The National Bank has the right to apply any of the following measures to micro-finance companies:
1) Determine financial standards, including standards related to minimum size of initial charter capital, structure and characteristics of charter capital and reserves, capital adequacy ratios, liquidity, rules restricting types of activities with different persons and extent of such activities and other financial standards outlined in this Law or required form the viewpoint of the National Bank for the purpose of carrying out prudent activities by micro-finance companies;
2) Audit activities of a micro-finance organization and its branches;
3) Give recommendations on improving the activity of micro-finance companies;
4) Give mandatory instructions on elimination of violations found and shortcomings in their activity that are in violation of this Law or regulations issued by the National Bank within the period defined by the National Bank;
5) Apply preventive measures and sanctions (including penalties) outlined by this Law, the Law "On banks and banking activity in the Kyrgyz Republic", other legislative acts of the Kyrgyz Republic and normative legal acts of the National Bank;
6) Request or demand and obtain balance sheet, reporting and other documentation or information on the activity or transactions carried out by micro-finance companies;
See:
The Decree of the Board of the National Bank of the Kyrgyz Republic of May 27, 2009 #25/3 “On Approval of the Regulations “On the periodic regulatory report of the micro-credit company / micro-credit agencies and pawn” and the Regulations “On the periodic regulatory report of the micro-finance company”
7) Suspend or withdraw license or temporarily suspend or forbid execution of transactions, permitted by this law;
8) In case of default to take actions in its relation in compliance with Law of the Kyrgyz Republic "On bankruptcy (insolvency)";
9) Take other actions, allowed in compliance with regulations issued by the National Bank in accordance with this Law or permitted by legislation of the Kyrgyz Republic.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 29. Audit of activity of micro-finance companies
1. The National Bank supervises the activity of micro-finance companies by auditing financial reporting and other information, provided by micro-finance companies, and conducting on sight inspections.
The National Bank conducts inspections of the activity of micro-finance companies on internal control in order to anti-money laundering and anti-terrorist financing and sends information about its results to the authorized body to anti-money laundering and anti-terrorist financing.
2. The National Bank has the right to delegate the authority to audit to professional independent auditors.
Executive officers of micro-finance companies are obliged to assist the auditors appointed by the National Bank.
3. After presenting evidence of their appointment, the auditors have the right to:
1) Have access to any premises (head office, branch, representative office) of micro-finance companies on any business day during office hours or any other time during which the members of the supervisory body, management bodies, administration, chiefs of subdivisions or persons in charge of accounting are actually on the premises;
2) Have meetings with members of the supervisory body and administration of micro-finance companies and its employees during office hours;
3) Research and make copies or take extracts from any documents or records (including computer records) and demand clarification of these documents or records from executive officers of micro-finance companies, any of their employees or other persons who are currently or were their main founders, shareholders, or participants;
4) Prepare instructions to write off bad debts or to create and maintain sufficient reserves or comply with other economic norms, this Law, other laws or regulations of the Kyrgyz Republic;
5) Take other necessary measures, related to audit of the activity of micro-finance companies.
4. The authority of the National Bank to audit micro-finance companies (including all authority related to any of such audits) is valid in respect of any company that has associated interests (insiders and affiliated companies) with a micro-finance organization and subsidiary companies.
In order to conduct audits of micro-finance companies, the National Bank has the right to request consolidated balance sheets that show the general financial condition of the micro-finance organization and all of its subsidiary companies. In case of violation of this Law and/or banking legislation, the National Bank may apply sanctions and measures outlined by this Law and other laws and regulations of the Kyrgyz Republic to micro-finance companies.
5. Auditing employees from National Bank (Audit Company) shall be prohibited from disclosing or transferring information, obtained in the course of an audit to third parties, except for the cases, outlined by legislation of the Kyrgyz Republic.
6. Persons, conducting an audit, are liable for unlawful disclosure or transfer of information obtained in the course of the audit to third parties within the limits outlined by legislation of Kyrgyz Republic.
(As amended by the Law of the Kyrgyz Republic of March 27, 2009 #87)
Article 30. Suspension and withdrawal of a license
1. The National Bank has the right to make decision on suspension or restriction of transactions of a micro-finance company, or suspension or withdrawal of its license (certificate) by complying with terms on license suspension and its withdrawal outlined in legislation in case of:
1) Violation of this Law, normative legal acts issued by the National Bank under this Law and other legislative and normative acts of Kyrgyz Republic;
2) Noncompliance of a micro-finance company with recommendations, warnings, instructions and other sanctions of the National Bank;
3) Violation of economic and other norms set by the National Bank;
4) Threat of default or solvency of a micro-finance company;
5) Failure to submit information that should be submitted to the National Bank or provision of false or incomplete information;
6) In other cases, determined by legislation of the Kyrgyz Republic.
2. Decision to suspend or restrict certain operations of a micro-finance company or suspension or withdrawal of its license by the National Bank shall contain a description of the specific facts of violations based on which the decision was made. In case of suspension or restriction of transactions or suspension of a license the decision shall also include but not be restricted to the following specific measures to be applied:
1) Restriction dividend payments by the micro-finance company or any of its subsidiary companies located in the Kyrgyz Republic;
2) Restriction on growth of the micro-finance organization through prohibition to establish branches, representative offices, subsidiary or other companies;
3) Require the sale of specified assets by the micro-finance company and utilize the sale proceeds in a certain way;
4) Require termination or correction by the micro-finance company of certain contracts or agreements concluded by the micro-finance company in parts where these contracts/agreements were concluded in violation of legislation, or avoidance of conclusion of such contracts in the future;
5) Require the micro-finance company to suspend certain types or all activities, permitted by its license (certificate);
6) Require the micro-finance company to take other measures to eliminate violations;
7) Apply bankruptcy procedures in compliance with the Law "On banks and banking activity in the Kyrgyz Republic" and the Law "On bankruptcy".
3. From the moment of withdrawal of a license, the National Bank removes the micro-finance company from the register for micro-finance companies. In this case, the micro-finance company is subject for liquidation, carried in accordance with the legislation of the Kyrgyz Republic.
The method of notifying clients of the suspension or revocation of the license of micro-finance company shall be established in the normative legal acts of the National Bank.
4. If the situation causing suspension or restriction of transactions carried out by a micro-finance company is corrected, the National Bank addresses a written notification to the micro-finance company informing that the suspension or restrictions on transactions was lifted or that suspension of the license was canceled.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 31. Information and documents
1. The National Bank has the right to request and obtain any information which a micro-finance company or any of its subsidiary companies has, including information on customers of the micro-finance company and sources of their funding.
2. Information acquired by the National Bank while fulfilling its responsibilities may not be given to a third party unless it is outlined by legislation.
CHAPTER 5
MICRO-CREDIT COMPANIES AND MICRO-CREDIT AGENCIES
See also the Temporary Regulations “On the establishment of micro-credit companies and micro-credit agencies in the Kyrgyz Republic”, approved by the Decree of the Board of the National Bank of the Kyrgyz Republic of September 11, 2002 #37/2
Article 32. Founders and establishment documents of a micro-credit company and micro-credit agency
1. The founders (participants, shareholders) of a micro-credit company or micro-credit agency may be legal entities or individuals – residents or non-residents of the Kyrgyz Republic on condition that they do not meet one or more of the grounds listed in subparagraphs 1-9 of paragraph 2 of article 13 this Law.
2. A micro-credit company may be established in any organizational and legal form outlined by legislation for commercial organizations.
3. A micro -credit agency may be established in any organization and legal form outlined by legislation of the Kyrgyz Republic for non-commercial organizations, except political parties, professional unions and religious organizations.
4. A micro-credit company and/or micro-credit agency shall have a charter that contains main elements required by civil legislation and in the provisions of this Law and other legislation of the Kyrgyz Republic.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 33. Transactions, carried out by a micro-credit company and micro-credit agency
1. A micro-credit company issues micro-credits (issued secured and non-secured micro-credits) to individuals and legal entities in national currency only from its own funds or funds provided by legal entities, founders (shareholders) on terms, negotiated with the borrower upon availability of certificate from National Bank.
2. A micro-credit company may in addition carry out the following banking transactions, upon condition that these transactions are outlined in the license obtained in accordance with the procedures for licensing micro-finance companies by National Bank defined by this Law:
1) Purchase and sell debt liabilities (factoring);
2) Retail banking services under the agency agreement with the bank without opening accounts for clients in the micro-credit company;
3) Purchase and sale of foreign currency on its own behalf.
3. A micro-credit agency disburses micro-credits (secured and non-secured micro-credits) in national currency from its own funds or funds of financial institutions and/or international finance organizations on conditions negotiated with the borrower in compliance with goals of a non-commercial organization, defined by the parties of the micro-credit agency upon availability of certificate from National Bank.
4. A micro-credit company, licensed by the National Bank to carrying out banking transactions mentioned in paragraph 2 of this Article, should carry out its activities in accordance with requirements and rules set out by legislation and the National Bank for these activities.
The National Bank has a right to apply the regulatory measures, mentioned in Chapter 4 of this Law to the micro-credit company or agency carrying out the activities mentioned in item 2 of this Article.
5. A micro-credit company or micro-credit agency have not rights not issue securities other than shares, issued by micro-credit companies in the form of joint stock companies, and are not allowed to carry out other banking operations not provided for in this Article, with the exception of financial leasing.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 34. Capital of a micro-credit company
1. Fully paid charter capital forms the base of a micro-credit company capital. The capital includes only charter capital on which the micro-credit company is free any obligation to repay funds, contributed by its founders, shareholders, participants.
2. Charter capital of a micro-credit company is formed only in the national currency of the Kyrgyz Republic using the funds of founders, shareholders, and/or participants. Use of fixed assets and intangible assets for the formation of charter capital of a micro-credit company shall not be allowed.
3. Prior to obtaining a certificate the micro-credit company is obliged to place the minimum charter capital in a deposit account, opened in a commercial bank of the Kyrgyz Republic.
4. The National Bank sets the minimum size of the charter capital for newly established micro-credit companies.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 35. Additional provisions for micro-credit companies and micro-credit agencies
1. Micro-credit agencies carry out their activity in compliance with legislation of the Kyrgyz Republic for non-commercial organizations in and in accordance with the provisions of this Law.
2. In order to start its activity and/or agent functions of donors, a micro-credit company and/or micro-credit agency is obliged to obtain a certificate from the National Bank in accordance with the requirements of the regulations of the National Bank.
3. To obtain a certificate of registration of a micro-credit company and/or micro-credit agency, the applicant shall submit two copies of the following documents:
1) Application for a certificate, completed in compliance with the form prescribed by regulations of the National Bank;
2) Notarized copies of formation documents;
3) A copy of state registration certificate as a legal entity;
4) List of management body members in the micro-credit company and/or micro-credit agency;
5) Document, confirming deposit of the charter capital funds of the micro-credit company to a deposit account in commercial bank (except for a micro-credit agency);
6) Information, certified by the founders, on the sources of funds contributed as registered capital of a micro-credit company.
4. The National Bank shall issue a certificate of registration or deny a certificate application within one month after receiving the application and all required documents for registration. During this time does not include a time of registration (re-registration) of a micro-credit company and / or micro-credit agency in the authorized state authority responsible for the registration of legal entities.
5. If the documents, received by the National Bank, do not comply with the requirements of the National Bank for obtaining a certificate, the calculation of the review period for the application and required documents shall start from the time of delivery of satisfactory documents.
6. In case of denial of issuance of a certificate or withdrawal of a certificate application, one copy of the documents submitted is not subject for return.
7. In the event of any change to any of the information, submitted to the National Bank, the applicant shall notify the National Bank and shall submit to the National Bank the documents with changes within ten days from the moment the changes were made.
8. Order of issuance, denial of issuance and withdrawal of a certificate from a micro-credit company and micro-credit agency is outlined in the regulations of the National Bank.
9. The National Bank or individual, authorized by the National Bank, has the right to revise, require and receive any information related to the activities of micro-credit companies and micro-credit agencies.
The National Bank may carry out inspections of micro-credit companies and micro-credit agencies on matters of internal control in order to anti-money laundering and anti-terrorist financing. Information on the results of this check is sent to the authorized body to anti-money laundering and anti-terrorist financing.
10. The National Bank or individual, authorized by the National Bank, has a right to recall the certificate of registration of a micro-credit company or a micro-credit agency in cases mentioned in item 1 of Article 10 of this Law.
11. The National Bank provides a letter of consent for the state registration (re-registration) of a micro-credit company and micro-credit agency in the authorized state agency registration form and manner, established by the National Bank in consultation with the registration authority for financial and credit and credit institutions regulated by the National Bank.
12. The National Bank is entitled to apply to micro-credit and micro-credit agencies of companies control measures, monitoring and impact under this Law.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
CHAPTER 5-1
PROTECTION OF CONSUMER RIGHTS AND RESPONSIBILITIES OF
MICRO-FINANCE ORGANIZATIONS
(Chapter as amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 35-1. Requirements for information about the cost of services
1. Information on the amount of interest rates and the commission fees and charges for services should be open and not be the subject of commercial and banking secrecy. The interest rate for each type of micro-credits granted (leasing) should be provided to clients in the annual nominal terms, in addition to the interest rate for the period and on an annualized basis using the effective interest method. The nominal rate of interest shall be calculated on the declining balance of the credit. Definition and method of calculation of the effective interest rate for the purpose of presenting to clients established by the normative legal acts of the National Bank.
2. Along with information on the amount of nominal and effective interest a micro-finance organization prior to execute (signing) an agreement on micro-credit (lease) with the client, is obliged to provide information to the client on the total cost of micro-credit in absolute value, showing separately the principal amount of micro-credit, interest, fees, and other payments related to the negotiation and execution of the agreement on micro-credit. Micro-finance organizations may not refuse to provide clients with comprehensive information on the cost of services. It is not allowed to use credit products, distorting the cost of providing services and the indexing of payments on the loan in relation to currencies other than the currency of the loan agreement.
3. In advertising, publishing, and disseminating information on the rates of interest on micro-credits issued (leasing) micro-finance organizations are required to indicate the nominal and effective interest rates. Nominal and effective interest rates, fees and commissions and tariffs must be specified in the agreement between the micro-finance organizations and the client. In accordance with the agreement value of interest rates on deposits and credits by mutual consent of the parties may be periodically revised to reflect the situation prevailing in the economy.
4. In order to prevent a dominant position in the micro-finance sector and ensure transparency of services provided by micro-finance organizations, compliance with antitrust laws by micro-finance organizations supervised by the National Bank. To this end, the National Bank may issue normative legal acts and take action of antitrust regulations.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 35-2. Minimum requirements for crediting
1. Micro-finance organizations are crediting and other services on the principles of integrity, transparency, reliability to clients based on their economic interests and abilities and the requirements of the legislation of the Kyrgyz Republic on the commercial and banking secrecy.
Micro-finance organizations in the placement of funds raised as commercial credits are required to ensure their correspondence for purpose activities referred to in Article 2 of this Law.
2. A micro-finance organization shall ensure that the following minimum requirements for the provision of crediting:
1) effective interest rate on the credit issued by a micro-finance organization shall not exceed the declared value (published) the effective interest rate on the date of the credit;
2) before the conclusion of the credit agreement should be provided full disclosure to clients (potential borrowers) comprehensive information on conditions for granting credits, including information on the total cost of the credit product at the state and / or the official language of the client's choice. Form of information should be standardized and systematized to allow comparison of credit products of different creditors;
3) before the conclusion of the credit agreement should be studied real creditworthiness of the borrower, including employment levels, income of family members, expenditure, number of dependents, etc., especially when given as collateral only home of the borrower;
4) prohibits the inclusion of the terms of the credit agreement additional fees, commissions and other charges levied and paid in the micro-finance organization and related to the negotiation and execution of the agreement for micro-credit, in addition to the published as well as other related services for a fee, regardless of the agreement with the borrower ;
5) types of credit products and agreements to them should be unified;
6) text of the credit agreement should be very clear and easy to read and understand. In this case, the language of the agreement - the state or official should be determined by the choice of the borrower;
7) agreement must provide for the right of the client at no charge to refuse receiving credit (leasing) in the period after the conclusion of the agreement until the client receives the money or make a payment in return for the property on leasing under the agreement;
8) agreement must provide for the client's right to early repayment of the credit (lease) at any time without penalty, provided notice to the micro-finance organization not less than thirty days prior to the date of such return;
9) it should be explained to the client by hand all the consequences of failure or improper execution of its obligations under the agreement;
10) borrowers should be given full information about the amount of actual debt and to changes in the credit agreement - the new payment schedule;
11) rate of interest on the damages (fine, penalty) for arrears of principal and interest, established in the credit agreement with the client - individual, including individual entrepreneurs without legal entity shall not be greater than the nominal interest rate on the credit, specified in the agreement. The amount of damages (fines, penalties) assessed for the entire period of the credit shall not exceed 20 percent of the credit amount;
12) client must be informed of the complaints procedure and contact responsible in micro-finance organization for receiving requests, complaints and proceedings;
13) micro-finance organization is not entitled to unilaterally amend or supplement the terms of the credit agreement, if it impairs the rights and obligations of the borrower;
14) borrower must be given the right to redeem the collateral in accordance with the agreement.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 35-3. Responsibility for violation of consumer rights
1. For violations of the requirements, specified in this Law, the officers of micro-finance organizations are established by the legislation of the Kyrgyz Republic responsibility.
2. For violation of the rights and legitimate interests of consumers under this Law and normative legal acts of the National Bank, the National Bank may apply to the micro-credit organization sanctions, provided for in this Law, the normative legal acts of the National Bank and other normative legal acts of the Kyrgyz Republic.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
CHAPTER 6
CONCLUDING PROVISIONS
Article 36. Prohibition of false advertising
1. Micro-finance organizations are prohibited from providing false or misleading advertising of their activity.
2. The National Bank has the right to request any micro-finance organization to change or cancel any advertisement or published information about the activity of the micro-finance organization or its name within the period, determined by the National Bank, if the National Bank finds the advertisement or information to be delivered by the micro-finance organization is wrong or misleading.
3. In case of noncompliance with the requirements of the National Bank within the period determined by the National Bank as provided in clause 2 of this article, the National Bank has the right to publish at the expense of micro-finance organization a statement advising that the announcement or information given by micro-finance organization is incorrect or misleads the clients and public. In this case the National Bank has the right to request reimbursement of such expenses from micro finance organization as they rose in form of debt to be repaid to it by the micro-finance organization.
4. Other penalties for intentional publication of false or misleading information of the micro-finance organization must be applied in accordance with Law of the Kyrgyz Republic.
Article 37. Audit of a micro-finance organization
1. Through its internal audit department, a micro-finance organization conducts internal audits to confirm the authenticity of accounts and appraise the adequacy and effectiveness of its internal control system in compliance with legislation and the regulations issued by the Kyrgyz Republic. For this purpose a micro-finance company is obliged, and micro-credit company (micro-credit agency) can create their own internal audit.
2. A micro-finance company shall conduct an annual independent audit by independent auditors. A micro-finance company is annually obliged to provide the National Bank with one copy of the Full Report of the External Auditor without changes including a management letter and financial statements within 30 days after receiving the report from the external auditor of the micro-finance organization, but no later than April 30 of the following year.
3. Micro-credit agency may conduct an external audit of its activities. Micro-credit company shall conduct an external audit of its activities and report to the National Bank in the form and terms of the National Bank.
3. The National Bank issues regulations that set forth the minimum criteria for the independent annual audit.
(As amended by the Law of the Kyrgyz Republic of April 26, 2013 #60)
Article 38. Accounting and reporting in a micro-finance organization
1. The financial year in a micro-finance organization begins on January 1 and ends on December 31. As for the first financial year, if state registration of the micro-finance organization took place after January 1, the financial year shall begin on the date of state registration and end on December 31 of the same year.
2. Specifics, volume, list of forms and report submission deadlines for micro-finance organizations shall be determined in regulations issued by the National Bank.
3. The micro-finance organization is liable for the authenticity and completeness of information and reports, submitted in compliance with the legislation of the Kyrgyz Republic.
4. The structure and deadlines for submission of the annual report by a micro-finance organization are determined by regulations of the National Bank.
The Resolution of the Board of the National Bank of the Kyrgyz Republic of October 23, 2004 # 26/2 “On approval of the Regulations “On the requirements for the accounting policy of commercial banks and other financial organizations licensed by the National Bank”
Article 39. Implementing this Law
1. This Law enters into force from the moment of its publication.
It is published in the newspaper “Erkintoo” of August 2, 2002 #58.
2. Existing micro-finance organizations are obliged to conform their activity with this Law within 6 months from the moment this Law comes into force.
President of the Kyrgyz Republic A.Akaev
Approved by Legislative Assembly
of the Jogorku Kenesh of the Kyrgyz Republic July 11, 2002
Approved by People's Representative's Chamber
of the Jogorku Kenesh of the Kyrgyz Republic July 3, 2002
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