MFO market trends: loan disbursements expand, with NPL growth slowing

After the restrictions were imposed, the quality of MFOs’ portfolio was deteriorating, with non-performing loans (NPLs) increasing in almost all microfinance market segments. In the second half of April, however, when companies started to actively implement the programmes for loan restructuring and loan repayment holidays, the NPL growth rates began to slow down. As a result, at the end of April, NPL90+ decreased by as much as 1.4 pp over one week, which was also associated with the sale of a part of debt.

Ultimately, major companies’ NPL90+ was up by approximately 5 percentage points as of the end of the second ten days of May, as compared to early 2020.

By mid-May, MFOs received over 19,000 applications for loan repayment holidays and micro-loan restructuring. Nearly 16,000 of these requests were approved. Currently, the overall number of restructuring applications is growing, yet at a slower pace. This increase is mainly accounted for by borrowers who are not eligible for loan repayment holidays pursuant to the anti-crisis law criteria. Creditors offer them alternative solutions, including their own programmes, and cancellation of a part of debt.

The portfolio of funds raised by MFOs over the period under review remained stable, without any significant outflow. The portfolio shrank by about 3%. Concurrently, bank financing for MFOs expanded by 24.3%.

Over the first week after the May holidays, loan repayments considerably increased (+26%) after their prolonged reduction. Among other factors, that downward trend in repayments had been provoked by the May holidays.

The period of the restrictions reduced the list of MFOs: from mid-March to 17 May, the number of companies excluded from the register was thrice higher than the number of MFOs put thereon. Over the period from early 2020 to the third ten days of May, 90 MFOs were excluded from the state register, with one-half of this number eliminated in April—May. Over this period of time, the number of companies that voluntarily withdrew from the register was thrice higher than the number of MFOs expelled for violations.

As of 21 May 2020, the register numbered 1,684 MFOs.