The approval rate for microloan applications has decreased for new and repeat clients

Microfinance companies (MFCs) have reduced approval levels to their lowest level since 2022 for both new and repeat clients. This is due to an increase in the number of refusals to clients with a high maximum debt load (MLL). In the autumn-winter season, market participants expect a further increase in refusals. As a result, competition for solvent borrowers will intensify, experts expect.

At the end of July-August 2023, the approval rate of microloans for new borrowers was 13.2%, for repeat borrowers – 86.5%. This is the minimum value since the beginning of 2022, as follows from materials from the Moneyman company, which Kommersant reviewed. Even in the spring months of last year, which saw the main crisis in the economy, the approval rate was 17-19% for new borrowers, the study says.

The main reasons are a decrease in the quality of incoming client traffic and lenders’ assessment of their own risks in terms of clients’ compliance with payment discipline, Moneyman explains. At the end of 2023, the share of approvals may be up to 10 percentage points lower than at the end of 2022 due to an increase in the number of refusals to clients with a high maximum allowance, confirms Elman Mehdiyev, Chairman of the Board of SRO “MiR”.

At the end of this year, the average market approval level may be 5–6 percentage points lower than last year, Summit Group expects. In the company itself, the approval rate for applications from new clients in August 2023 was 0.2 percentage points higher than in July, but 2.9 percentage points lower than in August 2022.

One should not expect sharper dynamics, believes Elman Mehdiyev: large players, accumulating up to 80% of the portfolio, have already seen their risk appetites have significantly decreased in recent years due to general volatility, and their approach to approval remains conservative.

However, not all companies confirm the trend. For example, the online financial platform Webbankir approved 96% of applications from repeat clients in August, which is 1–2 percentage points higher year-on-year. The percentage of approvals for new clients increased even more significantly – by 6-7 percentage points, the company’s general director Andrey Ponomarev cites data. But Webbankir also expects a slowdown in the growth of issuance volumes amid tightening regulation (from July 1, 2023, the maximum loan rate has been reduced from 1% per day to 0.8%, and the maximum allowable amount of overpayments has been reduced from 1.5X to 1.3X, where X is the loan body).

“The MPL limit will decrease from 30% to 15%, which could lead to a reduction in lending volumes by 5–10 percent,” said Ion Bolobosencu, Director of Subscriptions at Eqvanta Group of Companies. “In particular, we should not expect an increase in checks, since loans amounted to up to 10 thousand rubles may be excluded from the calculation of MPL until the end of this year – it is likely that the share of such loans in MFO portfolios will increase.”

Moneyman Marketing Director Andrey Greznev sees the potential for growth in the microfinance industry in increasing the quality of the client base, and this is exactly what companies will invest in (see Kommersant on August 17). However, the quality of potential borrowers depends not only on the MFO’s marketing campaigns, but also on the general economic situation, he adds. “Clients of microfinance organizations with a high personal income tax will have to confirm additional income to obtain a loan or go to a lender who has not yet chosen their limit,” believes Igor Smirnov, CEO of MCC Creditter.

At the same time, Alexey Perederiy, director of the risk management department of MigCredit, expects that in the fourth quarter MFOs may face an increase in the incoming flow of applications due to the fact that clients who were unable to receive the required amount due to restrictions on debt load will be forced apply to several campaigns in parallel.

Polina Trifonova