Russia’s delinquent payday loan portfolio hits new high



The number of overdue payday loans in Russia hit a record 5.4 million in February, according to credit rating agency Equifax.

In total, Russians owe 172 billion rubles ($2.2 billion) to microfinance organizations – very short-term loans that usually come with high interest rates and are designed to keep borrowers going for a few weeks. or a few months – the agency Recount the public news agency RIA Novosti.

But more than a third of the total outstanding amount – 60 billion rubles ($790 million) – is currently held by borrowers who are more than 90 days behind schedule. That figure rose 2.2% in February alone, bringing the volume of overdue payday loans, as well as the number of troubled borrowers, to an all-time high.

Russia’s Central Bank said last week that borrowers’ average indebtedness – the amount of their monthly income that goes to repaying debts – had increase during the pandemic due to declining income.

For years of declining and stagnating living standards, regulators have long watched Russia’s bloated payday loan portfolio and borrowers’ ability to repay, fearing it could be a source of broader economic instability. . Rights groups have also been concerned following several reports during the last Russian economic crisis on the violent methods used by debt collectors to recover loans from heavily indebted borrowers.

The overall outstanding amount of Russia’s loan portfolio, including payday loans, personal loans and business loans, has increased by 10% during the coronavirus pandemic, the rating agency Fitch has calculated. About one in eight loans had to be restructured, although this was most often done by small businesses, with only 5% of retail loans needing review.

Nevertheless, the Central Bank is optimistic on the health of the country’s banking sector and did not sound the alarm about growing corporate or household indebtedness. He believes a much smaller portion of lending is set to go bad than previously thought, and growth in the personal debt burden has also been lower than feared at the start of the pandemic.