For the first time in 12 months, the crowdfunding market showed a decline in performance

For the first time in 12 months, the crowdfunding market showed a decline in performance. At the end of September 2023, the volume of attraction amounted to 2.17 billion rubles, decreasing by 0.6% compared to August. Key borrowers of investment platforms – companies in the trade, services and public catering sectors – have reduced their presence in this market against the backdrop of the instability of the Russian currency and rising inflation. At the same time, the increase in rates had less of an impact on the segment, since overpayment for borrowers is not as critical as the speed of receiving funds.

At the end of September 2023, the volume of the crowdlending (crowdfunding) market amounted to 2.168 billion rubles, decreasing by 0.6% compared to August, according to data from the Money Friends company. For the first time since September last year, when mobilization was announced, the segment did not show a noticeable increase in monthly comparison. During the year, the monthly growth rate reached 25%.

The decline in the pace of entrepreneurial activity inevitably led to a slowdown in the growth rate of crowdfunding, explains Money Friends managing partner Yuri Kolesnikov. “In addition, the excess money supply in the economy as a consequence of inflation has led to a significant increase in revenue for enterprises in a number of industries, in particular catering. As a result, companies’ working capital increased and the urgent need to replenish it or maintain it at a certain level temporarily disappeared,” he explains. According to the Bank of Russia, “in the industry structure of attracting financing through platforms, the most common types of activities for SMEs are trade (wholesale, retail), construction of residential and non-residential buildings, transportation, and public catering.” Average checks on the crowdfunding market at the end of September were in the range of 0.4–8.2 million rubles. (depending on the company).

It had an impact on market dynamics and currency instability. The growing dollar exchange rate is the main inhibitory factor for the industry, since small importers are a significant part of the borrowers of crowdlending platforms, notes Roman Khoroshev, CEO of the JetLend platform.

But the increase in the key rate (in mid-September the Central Bank raised it to 13%) did not significantly affect the market. “Rates in crowdlending are traditionally high, so the increase in the key rate did not lead to their proportional increase. Market rates have increased by about 2 percentage points and currently amount to 16–35% per annum, while the bulk of loans are issued at rates of 22–27% per annum,” Yuri Kolesnikov cites the data. Often for a business this is the only opportunity for quick financing, and cost fades into the background, explains Kirill Kosminsky, executive director of the Association of Investment Platform Operators. “The overpayment is not as critical as the speed and the fact of financing,” he notes.

However, market participants expect a restoration of previous growth rates. According to Mr. Kosminsky, by the end of 2023, the volume of the crowdlending market may exceed 23 billion rubles. (at the end of 2022 – 11.5 billion rubles). “In September, borrowers tried to adapt their business processes to new conditions, and in October we are already seeing significant growth – by about 20% compared to September,” notes Roman Khoroshev.

The market will be supported by the further penetration of crowdfinancing into the borrowing market, its popularization both by the operators of investment platforms themselves and by the state, and the ongoing program of subsidizing the commission that borrowers pay to crowdplatforms for services to assist in attracting financing, Yuriy Kolesnikov expects.

The restraining factors will be the rapidly growing competition with the market for digital digital printing, digital digital printing and other similar hybrid products. “DFAs are a very flexible financial instrument; they benefit from low costs and high placement speed compared to traditional instruments, and do not require complex registration and information disclosure procedures,” the expert lists.

Polina Trifonova