Reading a microloan slowly
An office on every high street will lend you 3,000 som by tomorrow. Here is how to read the paper they give you.
Zholdosh A. · 14 Aug 2022 · Issue 112 min read
I took a typical offer from a microfinance office in Talas (not naming it, not accusing it, just reading it). Loan 3,000 som for 12 months. "Interest 2.4% a month". Sounds small. Over a year that is nearly 29% on the amount, but because you repay a part each month and the interest is counted on the whole amount, the real yearly cost is closer to 50%.
Then three extra lines: an "insurance fee" (60 som), a "processing fee" (45), and a "late payment" penalty of 1% a day. If you are two weeks late, the penalty alone is the price of a pair of winter boots.
The microloan is not a trap. For a woman buying a sewing machine or a man buying seed, it can be the difference between a business and no business. But it is a tool, not a present. Before you sign: ask for the total you will pay back, in som, on one line. If they cannot write it, do not sign.
2 Comments
As someone who sits on the other side of the counter at a bank: the question "what is the total in som?" is the best question a customer can ask. Please keep repeating it.
Timur, I will. Thank you for saying it from the counter.
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