MFIs have tightened requirements for borrowers from depressed industries

At the beginning of the year, microfinance organizations (MFIs) tightened the requirements for borrowers from the remaining depressed industries – the hotel and automobile business, retail trade, and fitness. Most willingly, MFIs approve loans to citizens who are employed in the financial and legal fields, are in the civil service or work in industrial companies.

Based on the results of five months of 2023, microfinance organizations have tightened the requirements for borrowers employed in the film business, the automotive sector and fitness. They received 81-88% of refusals, follows from MoneyMan data, which Kommersant has read. The risky areas of the borrower’s activity in terms of its ability to fulfill its financial obligations, according to the IFC, also include catering, hospitality, tourism, services, construction, retail and entertainment. Refusals are received by 67-76% of borrowers employed in these industries. Such selective behavior of creditors was typical of the pandemic period, when many sectors of the economy faced downtime due to quarantine restrictions.

Traditionally, employees of the financial and legal sectors, the IT industry, the public sector, education and industry are considered the least risky, MoneyMan notes. The very type of activity in some areas “works out financial discipline in people, in addition, they have a stable and regular income,” they explain there. These clients are 5-10 percentage points (pp) more likely to be approved.

Lenders have an understanding of the effect of sanctions on the economy, the peculiarities of the recovery of consumer activity in the current environment, says Andrey Greznev, Marketing Director at MoneyMan. “They can more confidently predict the state of affairs in certain industries and assess the solvency of borrowers employed in them,” he says.

Microfinanciers emphasize the relationship between employment and default rates. “For example, workers in agriculture and the catering sector make delays in 9–10% of cases, and representatives of law enforcement agencies, financiers and lawyers — in 4–6%. Accordingly, the loan amount of the second category of borrowers is on average 15–20% higher than that of the first,” explains Andrey Ponomarev, CEO of the Webbankir online financial platform, as an example.

MFIs also note an overall increase in the share of refusals. Since January 2023, the rejection rate for new clients has increased by more than 3 p.p., says Roman Makarov, CEO of Zaimer. “Borrowers indicate the area of ​​employment in the application form together with the average income level. Automated services check such information in a matter of minutes,” he clarifies. At the same time, a refusal can be received by the client even when providing false information in the questionnaire, including about the nature of his activity, Mr. Makarov notes.

The trend towards an increase in refusals is also associated with the introduction of new values ​​of macroprudential limits – “the issuance of loans to citizens with a high debt burden for MFIs becomes sensitive in terms of pressure on capital,” Roman Makarov notes.

According to Ivan Uklein, Director of Banking Ratings at Expert RA, on average for all segments in 2021-2022, microfinance companies showed an approval level of 27% with a downward trend. At the same time, it is necessary to understand that the level of approval for repeat customers is about 85–90% for many companies, the expert clarifies, and given the significant share of repeat requests, the weighted share of refusals in the total volume of applications is blurred.

Polina Trifonova