What Services Do Microfinance Organizations Impose and Can You Refuse Them

Microfinance organizations (MFIs) often offer additional paid services along with a loan — from SMS notifications to insurance or legal advice. It’s important to understand which of these you really need, and which you can safely refuse, so you don’t end up overpaying.

What Additional Services Are Commonly Offered by MFIs

When taking a loan, you may be offered a range of “useful” services — such as payment reminders, accident insurance, legal consultations, or personal data protection. Sometimes the total cost of these extras is almost equal to the loan amount itself. In many cases, their price is added to the loan principal, meaning you’ll also pay interest on those services — which significantly increases your debt.

To protect yourself, always check whether the approved loan amount matches the one you requested. Carefully review your loan agreement and pay special attention to the full loan cost — it reflects how much you’ll actually overpay, including fees for additional services.

Sometimes, MFIs include optional paid services that don’t affect loan approval or terms. Such add-ons may not appear in the FLC, making it harder to calculate your real expenses. Therefore, read every document attentively before signing anything.

How MFIs Can Disguise Paid Add-Ons

In an office, you might be given a pile of papers to sign, often without explanation. Online, you may be asked to tick several “special offers” before submitting your application. In both cases, you could unknowingly agree to paid services.

Be careful when entering a code from an SMS or email — this digital signature may authorize not only your main loan agreement but also a package of additional contracts. Always confirm what exactly you are signing or approving. If a service isn’t essential, refuse it.

Which Services Should Be Free — But Aren’t Always

By law, credit organizations are prohibited from charging for services that are an integral part of issuing or servicing a loan. Yet some MFIs find ways to make clients pay for them. Here are common examples:

Bank Card Verification

An MFI might claim it needs to verify your card ownership through a third-party service — and demand payment for that. However, verifying clients is the lender’s responsibility, not yours. Therefore, this service must be free for borrowers.

Credit History Check

Microfinance companies often check clients’ credit histories before approving loans. But if they do this for their own decision-making, they cannot legally charge you for it. It’s their cost of doing business, not yours.

Data Transfer to Multiple Credit Bureaus

MFIs must report loan data to at least one credit bureau. Some may offer to “improve your credit score” by sending data to several bureaus — for an extra fee. In reality, this doesn’t improve your score. The organization benefits by getting cheaper access to reports, not you. Therefore, such payments are unlawful.

Commission for Transferring Loan Funds

Sometimes, MFIs deduct up to 4% of your loan as a “transfer commission.” This is also illegal, since transferring money to the borrower is an inseparable part of the lending process and cannot be charged separately.

What to Do If an MFI Charges You for Free Services

First, try to resolve the issue directly with the organization. Explain that you are not required to pay for mandatory services. If the MFI insists, simply apply to another lender.

If the company has already deducted money, submit a written demand for a refund. You can also file a complaint with the Central Bank or the consumer protection authority to defend your rights and recover the overpaid amount.