The economy facing instability and rising inflation, payday loans began to be in high demand. These are so-called loans “till salaries”, they are usually borrowed in the amount of up to 30 thousand rubles and for short term. According to preliminary estimates, the aggregate portfolio of existing microloans for the first half of 2022 could grow by about a third. The National Bureau of Credit Histories calculated that issuance of microloans, or payday loans, returned to the level of “pre-sanction” February. 2.38 million microloans were issued in May 2022. The total amount of microloans that the Russians borrowed as of the first quarter of 2022 amounted to 175 billion rubles. The Central Bank of the Russian Federation provided such data.
Stability in spite of…
The term loan segment was the most resilient to the crisis compared to other MFI products, as well as bank consumer lending. In addition, new customers entered the market due to the restriction in bank lending. In the portfolios of microfinance organizations, there is a redistribution of productsэ shares. The share of payday loans is growing due to a reduction in the share of large loans. Moreover, this is understandable. The population began to spend more money while the ruble exchange rate strengthens and prices of food and consumer goods are stabilizing.
In economic uncertainty, people feel more comfortable if taking small amounts for everyday tasks and urgent purchases. To return microloan is much easier for people than to service long loans. Filling out applications for loan, customers began to indicate more often that they need money urgently. At the moment, there are all the prerequisites for the fact that the segment of term loans will demonstrate the highest dynamics of development in the microfinance market until the end of 2022.
Just don’t let him leave
At first glance, the situation in the segment of term loans is stable. Deliveries of microloans did not decrease even in the summer, when the need for borrowed funds from the population traditionally decreases. Large companies have tiered credit risk assessment systems. The demand we see now is quite controlled. There are no additional risks of delay. In addition, MFIs tightened scoring since February and began to issue microloans even more carefully. Customer base continues to grow, and this happens mainly at the expense of high quality clients.
At the same time, to maintain the share of the term loans market and the customer base companies will have to make additional efforts. And first of all, you need to increase the expenses for the same scoring, both spending on improvement of technologies, as well as on development. According to estimates of different experts, in the fall the number of jobs in the Russian economy can be in significant decline, real incomes of the population fall.
The risk that in the fall the microfinance market will face an increase in delinquency and a decrease in the amount of repayment of loans is quite real. The fight for paying customers will intensify. Companies will need machine technology training, predictive analytics in scoring to improve the quality of analysis of borrowers ‘ risk profiles.
Further development of scoring is also necessary because online demand for microloans is growing. The driver of this process were the covid restrictions. Aas a result, online loans squeezed out noticeably ordinary microloans in offices. The business of companies that could not approve microloans remotely, in the pandemic was under threat. Small companies with small portfolios, unable to withstand the technological race, will leave the market.
In general, the relevance of technology development has grown with tougher competition. MFIs that originally specialized in online loans should also improve constantly the quality of service. Offline companies enter the market with their remote loan services and fintech products.
The cost of attracting high-quality customers increases. Since February companies had to change advertising tools to attract customers because of the Google Adwords outage. At the current stage, companies are increasing budgets for SEO, contextual advertising, mailings via e-mail and SMS messages, testing new advertising opportunities. Competition for a high quality customer will continue to tighten, and advertising budgets will grow.
By Igor Smirnov, General Director of MCC Creditter