The share of repeat MFO borrowers has reached its highest level since 2020

At the end of 2023, the share of repeat MFO borrowers reached 83.4%, reaching a three-year high. This is due to the adaptation of the risk policy of MFOs to stricter regulation of the industry. The reduction in the number of MFOs themselves, while maintaining the total number of borrowers, also has an effect. In 2024, the trend will continue: in the current conditions, it is more profitable for companies to work with repeat customers, since attracting them is several times cheaper, and it is easier to predict their behavior over the long term.

At the end of the fourth quarter of 2023, the share of repeat MFO clients reached 83.4% of the total number of borrowers. This is the maximum value of the indicator since the third quarter of 2020. This data is provided by the online platform Webbankir. MigCredit MFC also noted that the share of repeat clients has increased. If in 2022 the ratio of new and repeat customers was 42 to 58, then in 2023 it reached 37 to 63, the company noted.

Attracting such clients is quite beneficial for market participants. “The economics of a loan are designed in such a way that its payback and profitability occur only when the client switches to repeat status; it is through repeat borrowers that the bulk of earnings are generated,” points out Moneyman CEO Alexander Pustovit. That is, according to him, companies always have the goal of transferring a new borrower to the repeat segment. In 2023, “lenders were especially interested in retaining clients for as long as possible against the backdrop of rising costs to attract them,” Mr. Pustovit noted. “The level of approval for primary clients is about 25–27%, for repeat clients it exceeds 90–92%,” according to data from SRO MiR.

Re-attracting through direct interaction can be four to eight times cheaper than attracting a new client through partners or advertising, notes Alexander Pustovit. “In the current environment, it is beneficial for companies to work with repeat customers. This is a high-quality and loyal audience that requires less marketing expenses,” points out Andrey Ponomarev, CEO of Webbankir.

Webbankir associates the increase in the share of repeat clients with the tightening of macroprudential limits (MPL) by the Bank of Russia, and, as a consequence, the growth of the Installment segment (medium-term loans), which are overwhelmingly issued to repeat clients. Thus, in the fourth quarter of 2023, the share of MFO borrowers with a debt burden indicator (DLI) of 50–80% should not exceed 30% (from the first quarter of 2024 – 25%), the share of borrowers with a DLI of 80% or more – 15% (see . “Kommersant” dated November 27, 2023).

The companies’ own work in setting up business models also had an impact: they restructured the application evaluation criteria and scoring models, adds Creditter CEO Igor Smirnov. According to Andrey Ponomarev, “also, verified borrowers have a lower probability of default, so companies are ready to offer them larger loans for a longer period.”

In addition, the increase in the rate of repeat requests over the past five years is also due to the fact that there are fewer participants in the market itself, adds Dmitry Zharsky, director of the Veta expert group. The number of lenders is decreasing, but the number of borrowers is growing or at least not decreasing, so the likelihood of re-application also increases. Over the past few years, the Bank of Russia has been actively cleaning up the microfinance market. As of February 6, there were 1,009 companies in the Central Bank register. Since the beginning of the year, the Bank of Russia has issued five orders to restrict activities of microfinance market participants, and excluded nine companies from the register.

Industry participants are confident that the share of repeat customers will continue to grow this year. “Our plans are to increase the share of repeat customers by 20% relative to 2023,” said Igor Smirnov. In the new regulatory environment, it will be more difficult for MFOs to find promising clients who are not burdened with an increased debt burden, MigCredit believes.

Polina Trifonova