‘The macrofinance market has dramatically changed’: only 20% of borrowers get money

Microfinance institutions use scoring programmes, restructure borrowers’ debts and work with legal entities

Uncontrolled lending for insolvent citizens and squeezing debts by all means in the activity of microfinance institutions (MFI) are a thing of the past. Speakers of an online session of Ruble Zone regional finance journalism competition, which was online on 19 May, claimed this. As experts assume, the market became more civilised under the supervision of the Russian Central Bank and after adopting a number of laws. Today MFIs use scoring systems in their work, tightened credit policy, decided to restructure borrowers’ debts and impose credit holidays. Many companies increased capital, and now sole traders and commercial organisations are among their clients. However, there is still high demand for microloans: the total credit portfolio of the MFIs is 260 billion rubles. The activity of debt collectors was discussed at the session of the competition too. Read more in Realnoe Vremya’s report.

Twice fewer applications approved than in 2019

The business of microfinance institutions after the pandemic and a fall in Russian citizens’ incomes remains= one of the most socially painful topics. However, Director of the Russian Microfinance Centre (RMC) and Director of MiR SRO Yelena Stratyeva claimed that those who think that microfinance is granting loans to insolvent citizens at an astronomical rate and then squeezing debts by threatening go by obsolete patterns. According to her, today the microfinance market has dramatically changed. A lot of processes that rebuilt the activity of MFIs, including in client service, have taken place. It is the launch of scoring systems, tighter credit policy amid the huge demand that has existed. Russians’ financial literacy is growing, though slowly.

Due to the pandemic, a lot of MFIs as well as banks decided to restructure borrowers’ debts, imposed credit holidays. These measures are still in force.

“I am proud of the members of our SRO, they showed off well. Most importantly, the pandemic hasn’t ended yet, it goes on, nobody has softened approaches to the scoring assessment, nobody has started to lend money left, right and centre like before. There is still tough credit policy and requirements for a borrower,” Stratyeva noted.

According to the RMC, the average share of approvals of applications in January and March was 15-20%, which is twice lower compared to last year’s analogous period. Nevertheless, there is still demand for microloans. The total credit portfolio of MFIs in the first quarter of 2021 is 260 billion rubles. The number of online loans increased. This is conditioned not only by the lockdown but also because the market got access to numerous information systems, including state systems where a borrower can be checked quickly and well.

“MFIs behave differently”

Yelena Stratyeva also noted clients’ attitude to microfinance institutions changed. Firstly, the trust in companies rose, people go there again. Secondly, a lot of new clients came, both legal entities and sole traders are among them. Business with legal entities is a new promising area of the MFI’s work. Many of them increased capital, after that, money to SMEs and commercial organisations started to be lent.

“Today the client evaluates a product, the necessity of this product and satisfaction with it, that’s to say, how it lives up to his expectations. This is why clients assess microfinance institutions differently, and MFIs behave differently.”

The head of the RMC noted that one of the members of the SRO did its own market analysis and says that the level of defaults decreased significantly. Stratyeva couldn’t provide the average default indicator in the market because it strongly varied from company to company: bigger players can afford it, small ones find it harder to do.

Welcome to Complain

Director of the National Association of Professional Collection Agencies (NAPCA) Boris Voronin said what was going on in the market of debt collection. Today collection agencies that are on the state registry of the Federal Service of Bailiffs of Russia, banks and microfinance institutions deal with it.

The first debt collection companies appeared in 2005 and serviced banks first. In 2007, they united in NAPCA, which became a self-regulating organisation. After the organisation’s code appeared, federal law No. 240-FL On Protection of Citizens’ Rights in Debt Collection was adopted three years ago.

“The law turned out to be interesting enough, it has a lot of details, it is practical. And it was mainly initiated because hooligans from a microfinance company set fire on a child in Ulyanovsk. Now it applies to everybody — both banks and microfinanciers. It also includes a code of administrative offences that spells out different fines. And now we are waiting for changes in the federal law No. 230 that will have a lot of new interesting novelties. There are also amendments to the code of administrative offences, another version has just recently been released when fines for banks and MFIs have been raised. Earlier, they used to be lower than for collection companies. It turned out in the process that fines have to raised for them too,” Voronin said.

He noted that NAPCA receives petitions and complaints from citizens about debt collection. For this purpose, there is a special service Welcome to Complain. There are quite a lot of complaints, over 3,000. With this number, the association ranks third in Russia after the Central Bank and the Federal Service of Bailiffs of Russia.

Voronin advised those who faced collectors’ inappropriate behaviour to go to the service of bailiffs, while NAPCA considers complicated cases related to money and agreements, helps people come to a compromise, revoke a writ and so on.

Moderator of the session, Editor-in-Chief of Finversia.ru, expert of the State Duma’s Committee for Financial Market Yan Art added that not all people know that NAPCA and MiR SRO considered complaints, questions and simply consulted clients.

“Not all people believe that it won’t be an excuse, a complaint won’t be redirected to those they complained about. It will be a real job. At the same NAPCA, one at times needs a consultation, support when it comes to debt settlement when there are several debts. Moreover, collection agencies themselves deal with such issues. I urge people who have credit to keep such options in mind because people with such problems, as a rule, are not in the best emotional shape to make rational decisions: where to rush, whom to look for and who can help with what,” Art concluded.
By Eleonora Rylova