How microfinance organizations help Russians make ends meet
Microfinance organizations have shown amazing resilience in Russia. The volume of loans issued by them grew by 30% last year, reaching 1 trillion rubles, the profit amounted to a record 57 billion. These are quite significant numbers: after all, microloans are amounts of only tens or two thousand, as they say “before payday.” Meanwhile, in 2023, the Central Bank thoroughly tightened the regulatory screws regarding microfinance organizations: in particular, the marginal interest rate for them was reduced from 1% to 0.8% per day, the maximum amount of overpayment was from 1.5 to 1.3 times the debt. . In general, we strangled them, strangled them, strangled them, strangled them… The analogy with the notorious Sharikov cats is, of course, crude, but on the whole correct.
This market is clearly not going to cool down: according to forecasts, by the end of 2024 the issuance of microloans will increase by 25%, profit — by 39%. Whether this is good or bad is rather a rhetorical question. For microfinance organizations, of which there are about a thousand officially registered today, this is definitely good. And for the “micro-borrowers”, a total of 18 million people? And for the economy? And for the country?
For a long time, the microfinance industry, which originated in the country in the mid-nineties, was inseparable from many myths about fraudulent lenders and murderous debt collectors. What about today? No, a certain ominous trail remains, but it is obvious: in recent years the sphere has undergone serious changes towards, let’s say, a more civilized format. Let’s say, before 2019, the average market rate on microloans reached a completely wild 680% per year. Then the Central Bank limited it to 365% per year, or 1% per day. Now it’s even less. Having cleared itself of a certain share of unscrupulous and ineffective players, this market now claims to be a high-tech business with clear regulation.
Borrowed funds can still be obtained at a considerable interest rate, but quickly and without leaving home — online or through a mobile application. No personal income tax certificate from work is required, no need to indicate contacts of friends, the number of loans is not limited. It is the speed, convenience and flexibility of issuing loans that are the main advantages of MFOs for Russians.
The main problem and the root of evil here is different — in the very situation when millions of citizens have to turn to the services of microfinancers, when current incomes are not enough for everyday life, paying for housing and communal services, buying food, or for some urgent, acute needs: to cure a tooth, repair a broken refrigerator. And sometimes — just to hold out until the next paycheck. As studies have shown, the bulk of MFO clients are, to put it mildly, poor people living in subsidized regions, in cities with a population of up to 250 thousand people, in villages and towns. They work in such sectors of the economy as trade, services, agriculture, construction, healthcare and education.
Increasingly, short-term (“payday”) and medium-term loans in the amount of 8 to 30 thousand rubles are taken by young people under 30 years of age. But pensioners often do this too — when their pension ends due to unforeseen expenses, for example, for treatment or child care. Another touch to the portrait of the average MFO client is the presence of a loan from a bank, which in some cases is overdue.
Everything is simple to the point of banality: people’s purchasing power is falling amid rising consumer prices; in the structure of expenses the share of mandatory payments and contributions (including interest on loans) increases. At the end of 2023, the average accrued salary was 73.7 thousand rubles, an increase of 14.1% in nominal terms compared to 2022, and 7.8% in real terms. At the same time, the level of wage inequality remains gigantic, both regionally and sectorally. In the “north” (for example, in the Chukotka Autonomous Okrug) workers receive up to 160 thousand per month, in Ingushetia — 36 thousand. Engineers and mechanics at military-industrial complex enterprises — 200-220 thousand, teachers — 15-20 thousand. As for inflation, it may well reach 15% for the poor, twice the official values, as the State Duma recently suspected.
On this super-fertile soil, the MFO Institute will bloom and bear fruit. Microfinancers not only get rich from human insolvency, but it turns out that they perform a vital social function, doing the grunt work for the state — helping Russians make ends meet. The authorities, as always, are fighting not the root cause, but the symptoms of the problem, tightening regulatory standards for the sector. “Strangling cats” is useless in the current socio-economic realities. They—that is, microfinance organizations—will still survive and, moreover, thrive. This is the paradox: the number of microloans in Russia has already reached trillions.