Banks are increasingly using MFIs as a channel for lending
Market loans to people in the first half of 2016 has occurred is not yet very noticeable, but truly revolutionary change. The credit of the organization under strict guidelines and risk assessment is increasingly used as a channel of lending to individuals, MFIs (microfinance institutions). If in the first half of 2015 at “Bank” MFIs accounted for less than 1% of the market portfolio, then by July of 2016 they have already formed 13% of new loans in the market. According to experts, there are certain risks that involved — including population deposits banks use for lending through MFIs, which are still not regulated so strictly, and are not participants of system of insurance of contributions. The Central Bank is following that trend and plans to introduce more effective control over the activities of financial groups.
Legislative changes that came into force in March 2016, by the middle of the year led to significant changes in the market MFIs. This is evidenced by data contained in the review of rating agencies RAEX (Expert RA). On the market MFIs there has been a redistribution, and began a large-scale consolidation.
“A year earlier “Bank” MFIs accounted for less than 1% of the portfolio market, and by July of this year they form the 1/8 and 1/7 of portfolio distribution of market. In the end, the new leader in terms of the total portfolio OTP “Finance”, developing the issue with access to funding and infrastructure of the parent Bank”, — stated in the review.
One more important point. Although the aggregate microloan portfolio in the first half of 2016 increased by 13% (vs. 4% in the previous year) and amounted to 79 billion rubles, excluding “Bank” the MFI portfolio decreased by 3%. And it happened for the first time since the formation in 2011 of a civilized market. Without regard to “Bank” the MFI portfolio decreased by 2 billion rubles to 68 billion rubles.
The same trend is observed in the results — the volume of new microloans for January–June 2016 compared with the same period last year increased by 37% and amounted to 90 billion roubles. Thus excluding the Bank-affiliated MFI’s total market issuance amounted to 78 billion rubles, which barely exceeds the figure of the second half of 2015 (about 75 billion rubles).
“The reduction segment is primarily related to the withdrawal from the market of some players and also with the growth of distressed assets with insufficient reserve capital to cover reserves. In addition, the “long” consumer microloans have to compete with Bank loans for borrowers with a good credit history, in contrast to PDL (payday loans)”, — stated in the review RAEX.
On the activities of MFIs in this year was influenced by several factors. First, according to the law, which came into force on 29 March 2016, the organization was divided into micro-credit (IWC) and the micro-Finance company (IFC). The right to attract funds of individuals have remained only on IFC. To obtain this status it was necessary to increase the capital to not less than 70 million rubles. Small MFIs do not have such an opportunity. At the same time that they are cut off from means of private investors, almost brought their activities to zero. Second, the Central Bank continued to exclude from the registry MFIs are companies that do not conduct real activities and not hand over the reporting. Thirdly, the activities of microfinancial affected by the limitation on the maximum amount of interest on loans. Moreover, the Central Bank plans to continue to reduce this level.
In 2016, the Bank of Russia deliberately worked to clean the market from unscrupulous and unsustainable MFIs. For the nine months from the state registry were excluded information about more than 1 thousand MFIs until the end of the year it is planned to eliminate about 600 organisations, — has told “news” in a press-service of the Central Bank.
There also explained that the decline in MFIs (excluding the data of the organizations affiliated with the banks) was largely just due to the fact that market participants became less. That is, a gradual increase in the presence of a “Bank” of MFIs is due to the decrease in “non-Bank”. But the fact remains. An increasingly important role in the market of microfinance institutions is dominated by banks that are experiencing difficulties with the rate of growth potrebkreditovaniya. They are limited in the maneuver due to the tightening of standards and requirements for risks by the Central Bank, therefore, forced to deny borrowers or more loans, or not quite a clean credit history. In the end, the funds raised on deposits including individuals can act as a source of funding for MFIs.
— Accurate statistics we have, but a number of the facts indicates a very high probability that the “Bank” MFO foniruyutsya from affiliates. They are unlikely to attract funds from the “market” of lenders-individuals, which are considerably more expensive and require a large-scale PR-campaigns, — the analyst of RAEX Ivan Uklein.
The Central Bank believes that the situation deserves close attention. The press service of the regulator noted that the position of the Central Bank is reflected in the Advisory report On “improving the regulation of the banking groups, banking holdings and other unions of legal entities with participation of financial organizations”.
— The paper addresses the issues of regulation of activities of such associations, which can enter including MFIs. The concept being developed involves the introduction of effective control by the regulator over risks of banks offering loans to affiliated microfinance organizations, — said the press service of the regulator.
Experts predict further consolidation in the market, the MFI and the increase in the share of “Bank” of microfinance organizations. According to the representative of RAEX, this will contribute to more regulation by the Central Bank, lack of capital (more than 90% of MFIs are unable to meet the requirements of 70 million rubles), which, in turn, leads to problems with funding.
A key constraint to market development are the lack of sufficient Bank funding and the high cost of borrowing. We also see a tendency to consolidation of the microfinance market due to the withdrawal from the market of small companies, which occupy the larger players — agrees Deputy Director of the SRO “World” Andrey Peranich.