A key step was the introduction of a legislative limit on the cost of loans. In May 2024, amendments were made to the KR Law "On Pawnshop Activities," which established a ceiling for the annual effective interest rate (AEIR). This rate is now calculated using the formula: the weighted average nominal rate of the National Bank of the Kyrgyz Republic plus 12%. According to the regulator's estimates, this limitation has resulted in loans now being issued at rates of approximately 30% per annum, which has positively impacted the situation where certain participants could set rates in the range of 100-300% per annum, as stated in the report.
Additionally, the requirements for transparency of loan conditions have been strengthened. Pawnshops are now required to provide clients with complete and clear information about interest rates, terms, and the procedure for calculating interest before signing the contract. It is also emphasized that hidden fees are unacceptable—situations where additional conditions became known only upon the redemption of collateral are no longer permissible.
Another important aspect is the protection of borrower data. According to the State Financial Supervision, practices of transferring information about borrowers and loans to credit bureaus have been restricted, aimed at protecting personal data and preventing the deterioration of credit history due to short-term pawnshop loans. This decision was also supported by the Cabinet of Ministers: in the resolution dated November 6, 2024, No. 671, a ban was established on the transfer of information to credit bureaus if the loan amount does not exceed 200,000 soms.
According to the agency, the main goal of the reforms is not to create additional restrictions, but to increase transparency in the market. This will allow borrowers to understand the cost of loans in advance and avoid unexpected conditions. It is expected that such changes will lead to a decrease in the number of disputes regarding charges, fees, and the return of collateral, which are areas of heightened attention from the regulator.
