Microloans and funds raised by MFOs increase in 2017 Q1
The microloan portfolio formed by MFOs in the first quarter of 2017 amounted to 96.4 billion rubles, 9.4% higher than the end-2016 reading. Furthermore, the number of active borrowers has risen by 14.6% year-to-date to reach roughly 5.9 million, while demand for microloans remains high. The number of loan agreements stood at 5.7 million, a third as high as the readings for the same period of 2016, as suggested by the Review of the Key Indicators of Microfinance Institutions for the first quarter of 2017.
The increase in demand for microloans results, among other things, from the dynamics of the average market values of their effective interest rates (EIR). The EIR on key consumer microloans is declining. In particular, the market average EIR on so-called payday loans (up to 30,000 ruble loans maturing in less than one month) reached 599.3% p.a. in the first quarter of 2017, 14.3 pp below the value registered in the same period of the previous year. The EIR on microloans maturing in one to two months for amounts exceeding 30,000 rubles dropped by 7.1 pp during the quarter to 84.6%. This decline triggered an increase in the number of agreements and growth in the value of microloans to households in the first quarter of 2017. The total microloans issued amounted to 56.6 billion, 5.2% higher compared with the reading registered in the fourth quarter of 2016.
The volume of funds raised by MFOs in the first quarter of 2017 reached 16.5 billion rubles, 11.7% higher than the end-2016 reading. The average investment amount per corporate investor exceeded 19.1 million rubles (+55.6% in the first quarter of 2016) and per individual investor reached almost 3.1 million rubles (+30.1%). Increased interest in investment in MFOs can be attributed to, among other things, falling rates on bank deposits. Having said that, of all funds raised by MFOs from individuals, the proportion of funds issued to individuals other than founders/participants/shareholders dropped. This trend may continue: amendments to legislation allow only microfinance companies (MFC) to raise funds from individuals who are not founders.
The number of participants of the State Register of Microfinance Organisations shrank to 2,462 over the first three months of 2017. Following repeated violations of the law, 184 MFOs were struck off the Register, while another 78 organisations left the market voluntarily and others were struck off due to liquidation. That said, there were 140 new entrants to the market in the first quarter of 2017. The second stage of the Register’s clean-up, which was launched in 2017, will be aimed at striking off organisations failing to comply with the law, including those infringing financial consumers’ rights, failing to comply with financial stability and reliability requirements (including those failing to create 100% loan loss provisions by the end of the year), as well as those outside self-regulatory organisations and failing to issue a single microloan over the year.