— In 2021, the demand for loans from microfinance organizations (MFOs) has increased. What is it connected with?
— The number of clients has increased. Thus, according to Equifax quarterly reports, the share of the economically active population using the services of MFOs increased by 3 p.p. over the year up to 18.2%.
We see three reasons. Firstly, in the first half of the year there was a crossflow of bank clients into the MFO segment. Secondly, young clients have become more likely to take loans online — the flexible scoring policy of companies allows them to start their financial history with cooperation with the MFOs. Thirdly, the growth in the number of clients is associated with the pandemic — those who used to take loans offline switched to online.
Simultaneously with the growth of the client base, the average amount grows: new clients have higher expectations for the loan amount. For example, in an offline MFO, the average amount is 5-7 thousand rubles more than online, and this category issues larger amounts.
— The MFO market is waiting for the next wave of regulatory tightening. What are the implications for the market of this step of the regulator?
— In 2022, the legislators plan to reduce the marginal interest rate to 0.8% per day and the maximum amount of accruals to 1.3 times the loan size.
This change was expected by major players in the microfinance market, who, after the first wave of regulatory tightening, began to adapt their business models to possible changes.
If to talk about the Lime-Zaim company, then today no more than 8% of the total number of loans fall under the rate cut. A significant share in the portfolio structure is occupied by loans to repeat customers, and our average actual interest rate is initially lower by 20-25% of the maximum amount established by law. Therefore, we do not predict a significant decrease in business margins and other financial indicators.
The upcoming wave of regulatory tightening could hit small players and companies with increased risk appetite that offer loans with a fixed rate in the range of 0.8%-1% per day. There is also a risk of development of the shadow sector if a group of clients is formed, whose score rating will be insufficient to obtain a loan under the new conditions. However, in our opinion, the adaptability of the business models of the top 30 players allows them to work with different consumer groups and minimize this risk.
— How will MFOs mitigate expected regulatory risks?
— To remain competitive and develop, a company must pursue a strong differentiation policy in interaction with clients that will help maintain the quality of the portfolio.
For instance, an interesting trend emerged in Q3: on the one hand, clients with an average score rating and a lower maximum limit take the maximum amount possible, but use extensions more often and default more often. On the other hand, the clients with the highest score rating take only half of the maximum limit approved by the company. At the same time, they have a higher payment discipline, are financially literate and demanding of the proposed product. We already offer products to this group of clients at a lower interest rate, without waiting for its official reduction at the legislative level.
— How does the growth in the volume of bonds affect the market as a whole?
— For MFOs, the possibility of issuing bonds is an incentive for quality development. However, despite a significant increase of 115% in total issuance volume, no more than 10 organizations out of about 1,250 MFOs issued securities in 2021. There is an information field where the top 30 companies strive for higher values and actively compete with each other. These companies have a market share that allows previously uninterested investors to evaluate them and consider the company as a tool for generating investment income.
Several market players have successfully managed their debut issues and paved the way for other organizations. These companies have shown the effectiveness of their business model and the level of business profitability, in which bonds really work and contribute to the qualitative growth of the portfolio.
— To what extent will raising funds through the placement of bonds be further in demand among MFOs and among investors?
— Bonds as an investment instrument will be 100% in demand on the MFO market in the near future. In post-pandemic reality, the relevance of online lending services will only grow. In 2022, the MFO market will continue to grow, which means that organizations will be interested in attracting funding and building long-term relationships with investors.
Bonds of microfinance organizations, as well as investments in MFOs in general, are a profitable offer for potential investors. They are not comparable to bank deposits and are high-yield bonds in the stock market.
We forecast that the average rate offered by MFO issuers will remain at the level of this year and vary within 14-15% per annum. Companies that have been on the bond market for a long time will strive to reduce the cost of funds raised, and MFOs planning a debut issue will offer a higher percentage per annum.
Russian version of the interview: https://nsk.rbc.ru/nsk/07/01/2022/61bf6c549a79473153a4b057