MFO market 2018 outcome: growth in mid-term credit portfolio, development of online segment
In 2018, the portfolio of microfinance organisations grew by 45% to RUB163.6 billion. The number of ongoing agreements was up by a comparable 44% and reached 9.4 million, according to the information and analytical material Microfinance Market Trends, 2018.
The total microloan portfolio grows, while the number of MFOs shrinks (-12% in 2018). As of 1 January 2019, there were 2002 companies, including 53 MFCs and 1949 MCCs. This trend is the result of Bank of Russia efforts to rehabilitate the financial market and withdraw unscrupulous and inactive players: only the most sustainable organisations will remain in the market. They should observe operational rules and comply with statutory requirements and restrictions.
In 2018, the market evolved amid adaptation to previously introduced regulatory requirements seeking to enhance the sustainability of companies, hamper growth in the PDL-segment, and protect consumers against excessive debt burden. 2018 also saw the end of the transitional provisioning period, a toughening of the conditions governing the creation of provisions for the overdue on PDL-loans (100% for the overdue of 91+ days), the introduction of a 10%-mark-up factor for PDL-loans (for capital adequacy calculation), and preparation for new caps on the maximum debt per one borrower.
Individuals’ demand for microfinance products remains the driving force behind market growth. During the entire 12 months of 2018, the loan portfolio grew by 51% (in part due to the expanding demand for POS-microloans), with the share of consumer loans in the structure of the total MFO portfolio up by 82%. In 2018, the segment developed mainly due to medium-term consumer microloans (Installments): the respective portfolio grew by more than a half (+52%) over 12 months.
The segment of online loans also developed in 2018: it doubled over 12 months, reaching RUB31.6 rubles or 19% of the total MFO portfolio. Increase in the volume of online loans is in part explained by the fact that several companies adopted an online format to cut costs and help adjust their businesses to the restrictions of the daily interest rate and the maximum individual borrower debt in effect since the beginning of 2019.
Despite the active growth of the MFO portfolio, the share of overdue loans (NPL 90+) remained at
The 2018 total net profit in the MFO market was RUB 10.87 billion.