Household debt burden declines: performance of microfinance industry in 2023
The proportion of short-term pay-day loans dropped to 34%, the lowest level over the past five years. They are usually the most expensive products offered in the segment of microfinance organisations (MFOs). The main amount of loans was issued in the medium-term segment. This drove down the amount of borrowers’ monthly payments and reduced households’ overall debt burden.
The reason for the change in the structure of issued loans was new regulatory requirements, i.e., the interest rate shall not exceed 0.8% per day and the maximum overpayment shall not exceed 1.3 of the debt amount over the entire life of a loan.
Moreover, macroprudential limits on borrowers with high debt service-to-income ratio were gradually tightening over the year. These measures, among other factors, improved the quality of MFO portfolios. For example, the proportion of overdue debt of up to 90 days decreased to 9%, which was the lowest value since early 2021.
Meanwhile, expanding consumer demand stimulated consumer lending. By the end of the year, the microloan portfolio was up by 22% reaching ₽443 billion. Online lending prevailed, with every fifth loan issued in offices.
More details are available in the Review of Key Indicators of Microfinance Organisations for 2023.