The Financial Experts has prepared a review of the microfinance market, which includes not joyful forecasts for many Payday Loans. According to experts from the agency, loans to paychecks may become unprofitable and their profits will fall sharply this year. Perhaps some companies that make the main bias on such loans will have to leave the market or significantly change their operating principles.
Increase of Payday Loans
The main reason for such changes is the active work of the BCA Bank in relation to the transparency of organizations in the microfinance market. Also, a significant cause was the shortage of capital for the formation of reserves for problem loans. Financial experts promise a decline in profits in organizations that provide loans to payroll, despite the fact that this type of lending is considered the most profitable for Payday Loans. As a rule, for such loans the annual rate is ten times higher than for long-term loans. As of July 1 of this year, the share of short-term loans was 24% in the total portfolio of Payday Loans.
The regulator has increased several times the reserve ratio for possible loan losses for a short period. By January of next year, each Payday Loan should have half of the amount due by one day overdue on the account and the entire amount due by over 90 days overdue. Before this tightening, the figures were much less – 1.5% and 15%, respectively.
In order for a Payday Loan to provide such a reserve fund, it will take a lot of effort and therefore financial costs. In addition, according to agency experts, in the second half of this year, the number of overdue loans may increase by 15%. According to some forecasts, the total amount that Payday Loans will have to make to the reserve in order to issue loans before paycheck will be 7 billion rubles.
Of course, other standards, which the tightens almost every month, have also affected the decline in the profitability of microcredit companies. As a rule, any innovation from the BCA Bank requires at least Payday Loans to incur increased costs.
Financial Experts expects that next year almost half of the organizations will leave the microfinance market. Even at the moment there is a decrease in the number of companies. So, this year, the register of Payday Loans increased by 300 organizations.