Experts in Russia are evaluating the microfinance market’s prospects for the coming year based on the first half of the year. They note that growth rates could slow to around 5-10 percent, a figure that is notably lower than in the crisis year of 2022 and even below forecasts for 2023. The anticipated slowdown is linked to tighter sector regulations, which may push some market participants to the breaking point. Analysts suggest that as many as 40 percent of microfinance companies could exit the market.
The discussion stems from a market review for the first half of the year prepared by Expert RA. That review places 2024 growth in the microfinance segment at 5-10 percent, aligning with gains seen in retail lending. This trajectory stands in sharp contrast to the post-pandemic surge of 2021, when growth reached about 51 percent, and the 2022 crisis period, when growth was around 22 percent. While the review does not provide half-year data, Expert RA projects roughly 10 percent growth for 2023 overall, with several market participants estimating a broader range of approximately 10-20 percent for that year.
The authors of the market review emphasize that the sector will need to adapt to significant challenges, even in the absence of new economic shocks. This adaptation is expected to slow growth as microfinance players adjust to a tighter operating environment.
Attention is especially focused on macroprudential restrictions set to take effect on October 1. The rules cap the proportion of borrowers with debt service burdens above 80 percent at 15 percent and require no more than 20 percent of borrowers to have a debt burden in the 50–80 percent range. The Central Bank of Russia (CBRF) has also announced higher reserve rates for microloans, up to 0.8 percent per day for a period of two to six months. The review notes that because the microfinance product category overlaps significantly with the regulated payday loan segment, extending loan terms beyond 30 days was historically a way to alleviate capital pressure. As a result, meeting the new standards may demand a substantial increase in capital for microfinance organizations or lead to stagnation for players with limited financial resources.
In the latter half of the year and during 2022, microfinance organizations reported notable profits despite tightening regulations and crisis conditions. Market observers contend that regulator actions primarily aim to limit the supply of credit products, yet demand remains strong enough to sustain growth even as regulatory burdens tighten. This perspective is shared by Valery Piven, head of the financial institutions rating group at ACRA, who notes that the microfinance business remains profitable enough to support development and attract new resources, even if profitability trends soften as the market adjusts.
Earlier in the year, discussions in the State Duma considered measures that would restrict microfinance loans to foreign agencies, though details and outcomes of these discussions are not included here for brevity.
Cited insights come from market analyses and statements by industry analysts who highlight the balance between regulatory oversight and ongoing demand. The overall message is one of cautious optimism tempered by the reality of tighter rules, higher capital requirements, and the need for operators to adapt quickly to a changing regulatory and economic landscape. Although profits have shown resilience in prior periods of stress, the current environment suggests that only well-capitalized players with solid risk management will sustain stronger growth in the near term, while smaller entrants may face higher exit rates. This evolving scenario underscores the importance of prudent balance-sheet management, clear strategy, and disciplined lending practices as the market moves forward. (Expert RA)