Microfinance market: major trends in Q1
The main indicators of the microfinance market increased in 2019 Q1 YoY. The microloan portfolio grew by 45% up to 173.6 billion rubles; quarterly disbursements increased by 33.7% up to 93.8 billion rubles, according to the information and analytical material ‘Microfinance Market Trends’.
The law decreasing a borrower’s debt load entered into force, which became the main event in the microfinance market. Thus, beginning from 28 January a daily loan interest rate may not be higher than 1.5%, and maximum loan payments (interest, penalties, additional services, etc.) may not exceed two and a half times the loan amount.
Gradual growth of market concentration and digitalisation continued in the first quarter. As the number of microfinance organisations’ standalone branches generally decreased, online disbursements were up. Extensive development of the online segment enabled to ensure microloan availability for consumers despite the decreasing number of offices.
Over 2018, the ratio of non-performing loans (NPL 90+) did not exceed the 2017 peak and slightly reduced by the end of 2019 Q1 (down to 25%). There is an emerging trend for changing the model of dealing with overdue loans: owing to gradual market consolidation, more companies start handling overdue debts on their own.
Experienced companies well established in the market, which account for most loan issue, are progressively exiting the PDL segment or diversifying their business models where PDL is becoming one of multiple business areas. The largest PDL segment players expect to attract customers of microfinance organisations that will be unable to handle regulatory load.
The measures restricting microfinance organisations’ operations and implemented to limit borrowers’ debt load did not fully show their effect by the end of the first quarter because a part of the overall portfolio during that period consisted of loans disbursed under previous restrictions and work rules. However, lower interest rates are already impacting the amount of interest income received — despite growing disbursements, revenue in the PDL segment did not change vs the previous quarter. Microfinance organisations’ net profit in the PDL segment reduced by 42% as compared to the previous quarter, while net profit in the market in general increased by 65% owing to the growth in the instalment segment and in the combined segment.