Microfinance sector adjusts to lower interest rate ceiling: Q1 review
The proportion of microloans issued by microfinance organisations (MFOs) to customers with high debt service-to-income ratios (over 80%) shrank from 40% in 2022 Q4 to 30% in 2023 Q1. This reduction became possible owing to the macroprudential limits introduced by the Bank of Russia as they restrict the issue of high-risk loans.
Nevertheless, MFOs’ revenues and returns remained high. MFOs have the potential for adjusting their business models to the decrease in the interest rate ceiling from 1.0% to 0.8% per day beginning on 1 July 2023.
Microloans were mostly issued online (72%), with short-term ones disbursed remotely almost always (91%). However, a part of borrowers still preferred to apply to physical offices of MFOs and receive microloans offline.
More details are available in the Review of Key Indicators of Microfinance Organisations for 2023 Q1.