Prices on the MFO assignment market have reached their highest since 2019

At the end of 2023, the volume of the microfinance debt assignment market and their price were the highest in five years. On the one hand, there has been a market recovery after the failure of 2022, on the other hand, against the backdrop of the transformation of the microfinance industry, companies are more actively getting rid of “young” arrears, which attracts investors.

ID Collect, as part of the “Buyers and Sellers Club” NAPKA, reported that the volume of the assignment market (assignment of claims) to microfinance organizations amounted to 71.6 billion rubles. This is the maximum value since 2019. The price was also the highest in five years – 16.55% of the debt amount on average for the year.

According to SRO MiR, the share of closed transactions was 94%, which indicates an increase in investor interest in the market. The volume of investments for 2023 amounted to 11.8 billion rubles, as follows from the materials of the “Buyers and Sellers Club” NAPKA.

The weighted average price of an MFO assignment at 16.5% at the end of 2023 is a normal level, reflecting high consumer competition, experts believe.

Now the assignment market in this segment is highly competitive, explains Alexander Vasiliev, general director of the service for the return of overdue debts ID Collect.

However, in 2024, there are no prerequisites for a noticeable increase in the value of MFO portfolios in the assignment market, Mr. Vasiliev believes: “Against the backdrop of continued high competition among buyers, the weighted average price of an MFO assignment may increase slightly by within 2 percentage points compared to the values ​​in 2023 and amount to about 18 ,5%”.

“Unlike a banking assignment, where almost all debts are sold through trading platforms or through an open tender, debts to microfinance organizations are sold only partially through a tender and the rest through individual contracts, which, in turn, indirectly affects the overall pricing, – they add to NAPCA. “However, regardless of the method of sale and segment, the price is influenced by several factors: period, amount and, importantly, the quality and completeness of the dossier, as well as demand from buyers.” NAPCA clarified that buyers are willing to pay a high price only for “young” portfolios.

The overdue period that MFOs offer to the market for sale under the assignment scheme has indeed become “younger”.

Thus, according to ID Collect, a third of the market was for debts aged 181–270 days, another third for debts aged 121–180 days. The oldest debts—more than 541 days old—accounted for less than a quarter of the market.

“In general, a situation has arisen where it is more economically profitable for many companies to sell portfolios than to collect them themselves or through an agency scheme. For example, judicial collection is a fairly lengthy procedure,” explains the Summit Group. “At the same time, consolidation continues in the microfinance market, and large microfinance organizations have the opportunity to actively increase their issuance and their share in the overall portfolio. Which means we need money. And one of the operational options for obtaining them is the release of reserves.”

MFOs often sell overdue debts at the 90th day, aiming for a quick cash turnover. Such trends may continue in 2024, since companies are interested in promptly investing funds and issuing new loans, confirms Denis Belkin, head of the Debt Market ETP.

“The share of “young” arrears can either increase or decrease depending on many factors, including risk management strategies of MFOs, changes in the economy and the behavior of borrowers,” notes Oleg Kalmanovich, chief analyst at Neomarkets. “Companies may be inclined to more actively collect “young” “delay in the face of tightening competition and increasing risks. However, it is also possible that companies will prefer to get rid of arrears earlier in order to minimize risks and maintain their financial stability.”

In 2024, Mr. Kalmanovich believes, MFO companies may become more active in managing arrears if the risk of loan defaults continues to grow. At the end of the current year, he believes, the growth in arrears could be about 20%.

Polina Trifonova