MFIs earned on the side – Newspaper Kommersant No. 57 (7502) dated 04/04/2023

At the end of 2022, the revenue of microfinance organizations (MFIs) from the sale of additional services reached 17% of the total income. In 2023, the trend will continue amid regulatory tightening. A number of market participants will seek to compensate for the decline in business margins by aggressively selling third-party products. However, in this case, it will be more difficult to retain customers.

In 2022, MFIs increased income from non-core activities, follows from the review of the microfinance market published by the Bank of Russia on April 3. These areas include commissions for the sale of various types of insurance and telemedicine, SMS informing, an extended service package, etc. At the end of the year, they accounted for 17% of all industry revenues, 4 percentage points more than in 2021. At the same time, according to the Central Bank, almost a quarter of companies last year received a significant part of their income (more than 10%) from activities not directly related to the provision of loans to the population.

“Of course, a client does not come to an MFI for insurance, legal advice or telemedicine. Nevertheless, due to the current economic and regulatory situation, we were forced to revise our commission policy and share with clients part of the transaction costs that we previously incurred ourselves,” explains Andrey Ponomarev, CEO of the Webbankir online financial platform.

“In 2022, we expanded the range of additional products with a focus on useful and in-demand options. In particular, the Personal Credit Rating product was launched, which allows the client to look at himself through the eyes of creditors in terms of assessing the attractiveness as a borrower,” adds Sergey Vesovshchuk, CEO of MoneyMan.

Eqvanta Group is seeing an increase in demand for insurance products that cover health and disability risks, said Andrey Kleymenov, CEO of the company.

In 2023, the trend towards revenue growth due to non-core activities will continue against the backdrop of a regulatory cap on the maximum rate (currently 1% per day, from July 1 it will decrease to 0.8%) and the maximum possible overpayments on a loan, taking into account all penalties and fines (from 1.5x to 1.3x; see Kommersant of January 23 and March 30), market participants believe. It cannot be ruled out that some players will try to compensate for the decline in business margins in this way, says Ivan Uklein, director of banking ratings at Expert RA.

Elman Mehdiyev, head of the board of the SRO MiR, stressed that she monitors the compliance of companies with behavioral standards. However, he acknowledges that any change leading to lower interest income will result in market participants unable to cut operating costs to offset losses by selling additional services.

“In general, this is a market story. But only until the moment when these “dopa” are accepted by the consumer consciously. Unfortunately, in most cases, borrowers do not understand that they have assumed additional obligations, since the approval method is used here, for example, through the “Next” or “Accept all” buttons,” emphasizes the expert of the “Popular Front” project “For the rights of borrowers » Alla Khrapunova.

However, market participants do not expect the mass practice of increasing sales of additional services. Some of the microfinance companies interviewed by Kommersant did not develop new non-core services for clients in 2022 and have no such plans for 2023. “Conversion for clients who see an insurance offer when applying for a microloan is on average 6% lower among new clients and 3% among regular clients. We rely on loyalty and regular customers,” explains Elena Malysheva, Commercial Director of Summit Group. In addition, Mr. Uklein notes, in the medium term, we can expect the adoption of amendments to the law “On consumer credit (loan)”, which involve the inclusion of all additional services in the full cost of the loan.

Polina Trifonova