The share of medium-term loans at the end of the 3rd quarter of 2023 exceeded half of all issued

At the end of the third quarter of 2023, the share of medium-term (Installment) loans in the microfinance market for the first time in two years exceeded half of all issued. Obtaining loans for longer periods allows borrowers to show a lower debt load, which allows MFOs to comply with stricter regulation. However, with such a policy, companies need to calculate the client’s solvency for a long term, and losses in the event of an error in scoring are much higher than with short-term loans.

According to Bank of Russia, according to the results of the third quarter of 2023, the microloan portfolio grew by 6% compared to the previous quarter, reaching RUB 423 billion. At the same time, in the third quarter, for the first time since the third quarter of 2021, the share of medium-term loans (Installment, IL) exceeded half of all loans issued. Of the total amount issued, 260 billion rubles. IL loans accounted for 51% (previous quarter – 41%). At the same time, the share of PDL loans decreased slightly – from 35% to 34%, while the share of POS loans fell from 14% to 4%, according to the Central Bank report.

The bulk of IL loans were issued in the medium-term segment, in which the total cost of credit (FLC) and loan size are comparable to the short-term PDL segment, the RBI report said. “On the one hand, this reduces the monthly payment of borrowers (unlike PDL loans, IL loans are repaid in installments similar to bank loans). On the other hand, with the same volumes of issuance, the size of the portfolio increases more strongly, since the turnover of medium-term loans is lower,” explains the regulator.

“This type of loan is paid in installments and has less impact on the client’s monthly debt load. Accordingly, it is easier for companies to comply with macroprudential limits,” notes Andrey Ponomarev, CEO of the online financial platform Webbankir.

The Installment product involves issuing loans in the amount of up to 100 thousand rubles. for a period of up to six months. IL rates may be lower than in the PDL segment, ranging from 50% to 272% (see “Kommersant” dated December 18). Such loans are available by default to verified borrowers. At the same time, the level of approval in this segment is low and does not exceed 20% for primary clients, they add to SRO MiR.

Based on the results of the fourth quarter of 2023 and next year, Installment’s share continues to grow, according to market participants, although at a less rapid pace. “Companies are fighting for quality clients and are ready to offer such borrowers large sums for longer periods,” points out Andrey Ponomarev. The industry is looking for a balance between the interests of borrowers, the requirements of the regulator and its own interests and risks, moderately increasing the share of IL in the portfolio due to these loans, notes Moneyman CEO Alexander Pustovit.

However, working with IL requires fundamentally different scoring. Unlike payday loans, here it is necessary to predict the client’s solvency for a longer period, Mr. Ponomarev points out. The likelihood of various unforeseen circumstances over the horizon of several months is higher than for short-term loans. And given that the amounts in IL are several times larger, the cost of an error increases, the expert warns. “In this case, high-quality scoring is much more difficult to build due to the smaller number of issues and the longer onset of the target event,” says Nikita Kotochigov, product director at MigCredit MFC.

Polina Trifonova