Small, short-term loans surpassed usage of credit cards
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In early 2025, the world saw a 13.8% jump in microloans compared to February, while credit card issuance took a 2.9% hit, according to recent data. This shift continued on an annual basis, with microloans skyrocketing by 52.7% compared to a staggering 49.8% decline in credit cards.
For the first time since 2020, microfinance organizations (MFOs) outdid the pace of credit card issuance with a whopping 112.1 billion rubles in loan distributions, contrasting the 108.1 billion rubles limit for new credit cards. This change in the financial landscape caught the attention of the experts.
Suren Asaturov, the Director of the financial institutions ratings group at AKRA, explained this trend by pointing to the tightening of banking regulations and high interest rates. Most credit cards offer a grace period, which can mean lost income for banks.
Ivan Ukllein, Senior Director of Bank Ratings at "Expert RA," revealed that the end of the Central Bank's (CB) moratorium on non-compliance with the full cost of credit limits in the credit card segment had a significant impact. Microloans were less affected by the increase in the key rate from 7.5% to 21% in 2023-2024, compared to the braking effect it had on new bank credit card issuances. Especially the rise from 18% to 21% and the tightening of the risk matrix made the unit economics of credit cards almost negative.
Demand for MFO services started to rise from fall 2024, with a staggering 70% of new loans being microloans compared to 47.4% a year prior. A representative of the self-regulatory organization "MiR" noted that clients now view the terms of credit cards as similar to microloans, which influences the redistribution of client flows.
In 2024, more than 6.4 million citizens tried out microloans for the first time, bringing the total number of borrowers to 14.8 million. Strikingly, 2 million people were borrowing at the maximum interest rate.
As the CB prepares for a reform of the MFO market in 2025, including limiting the maximum overpayment on loans to 100% of the principal, there will be limits on the number of "expensive" loans per borrower and "one loan at a time." These changes might lead to a possible reduction in the MFO portfolio by 40% in 2026 and 55% in 2027.
Interesting Insights:
- Growing financial inclusion initiatives, such as SBA programs in the US and BNM's cross-border payment systems in Malaysia, are prioritizing microloans to address economic disparities.
- As e-payment growth surges and lenders exhibit lower risk tolerance post-pandemic, microloans are catching on due to their smaller exposure and reduced default risks.
- Mobile banking adoption and cross-border integration are enabling efficient microloan distribution and providing scalability for these services.
[1] SBA Microloan Program, U.S. Small Business Administration (SBA)[2] Malaysia's Digital Economy Corporation (MDEC) Annual Report 2025[3] JazzCash Digital Microloans Volume, Jazz Pakistan Limited (Jazz) Quarterly Report 2025[4] Intesa Sanpaolo Annual Report 2024
- The rise in microloans in 2025, a 13.8% increase over February, is especially significant in the finance industry, surpassing the decline in credit card issuance by a substantial margin.
- In 2026, the microfinance industry is expected to face a potential reduction in portfolio due to the Central Bank's reform, which includes limits on the number of expensive loans per borrower and one loan at a time.
- The growth of microloans is not limited to Russia, as financial inclusion initiatives, like the SBA Microloan Program in the US, prioritize them to tackle economic disparities.
- The microfinance sector is gaining traction globally, with e-payment growth and mobile banking adoption enabling efficient distribution of these services, particularly in countries like Malaysia, where cross-border integration is fostering scalability.
- The banking-and-insurance sector has been looking at microloans as a lower-risk alternative post-pandemic, given the smaller exposure and reduced default risks they offer, as seen in the case of Jazz Pakistan Limited's Digital Microloans.
