while debt repayments account for an average of 18% of all expenditures. According to the National Bureau of Credit Histories
, last year each borrower had an average of 2.3 loans.
In addition, not without reason the Central Bank is worried
about new inflationary pressures from the rise consumer lending. If prices start to climb, Russians will go to banks for more loans. This is another problem: people are increasingly taking out consumer loans because without them it would be impossible to maintain their usual standard of living – and most people are not ready to lower their already-low standard of living.
For example, a third of those surveyed by the online financial platform Webbankir are ready to take out a loan to celebrate the May holidays, while every eighth has already done so
If Russians are ready to borrow to pay for their pleasures, then they will also go to the bank for more serious reasons as well: since last autumn, they have used credit not only for plane tickets for men dodging the mobilization, but also military uniforms
, including protective equipment, for men who were mobilized and went to fight. To “repay their debt to the motherland,” many families had to get into real debt, and there is no doubt that new fodder for the war will continue to be recruited in the same way: with the help of friends, relatives, volunteers and... loans.A profitable business
The most important thing, however, is the cost of the loan. While the Central Bank expresses concern about inflated prices for new housing amid near-zero-rate mortgages, we are still talking about overpaying by a few percent. Bad, but not terrible – especially if housing prices are rising and people are trying to repay their mortgages ahead of schedule, while rates are low.
Yet when poor people go for a loan, they most often turn not to a bank, but to a microfinance organization, where loans are issued without any nitpicking about borrowers’ financial situation, sometimes at 325% per annum
. And only from July 1, 2023, the Central Bank will introduce a limit of no more than 292% per annum.
According to MiR, an association of microfinance organizations whose loan portfolio accounts for 80% of this market, in 2022 MiR members issued RUB 294.5 billion of microloans. According to the Central Bank, RUB 364.0 billion of such loans were issued overall, about 3% of consumer loans issued in 2022.
It might seem like not that much, but consider that, according to MiR
, its members have more than 17 million active borrowers. The thing is that microloans are very small, at about RUB 12,000 on average, according to the Central Bank. However, for a huge number of Russians, this is the size of their monthly salary.
Official microfinance organizations are only the top of the iceberg. At bus stops in any provincial city, you can see a lot of ads printed on bad paper for “quick money,” “a loan without problems,” a “payday loan,” etc. Most of these ads are from illegal loan sharks. And though the Central Bank is fighting
them, this business is flourishing. And often in close, corrupt cooperation with local silovik
and government institutions.