Microfinance market outlook: 2019 results
Tighter regulatory measures in the microfinance market, introduced in 2019, boosted the importance of technology companies, increased competition, and caused unsuccessful actors to leave the market voluntarily. This conclusion, among others, is presented in the Microfinance Market Trends, an information and analytical commentary prepared by the Bank of Russia's Microfinance Market Department.
Measures to protect the rights and interests of MFO customers have mostly influenced payday loans (PDLs): for the first time in a long while, a Q3 drop in payday loans curbed the growth of the respective portfolio. Activity in the segment is supported by online loans, which account for 68% of all PDLs.
Through 2019 the portfolio and amount of microfinance loans went up by 29% and 26% respectively (in 2018 the market expanded by 45%). As the consumer microfinance market is cooling down, starting from 2019 Q2 the portfolio of lending to SMEs has been growing faster than the market portfolio.
Despite a certain rise in overdue debt through the year, its share shrank to 28% in Q4. The movements are still mostly determined by how much debt was sold.
Companies develop new practices for recovering debt through court. Half of market participants are already working with courts, as 2018 showed the effectiveness of this path (more than 70% of the debt was recovered).
Lively dynamics of the online segment was last year’s main trend in the MFO market. Thanks to digitalisation, companies expanded their presence in the regional markets without actually establishing offices. New technology companies aiming at PDL are the most active players in the online segment.
In 2019, the number of MFOs lowered by 11.4% due to the fact that more companies decided to be excluded from the state register. In the second half of the year about