Hangin' with the Fast Money: Why Businesses Opt for Microloans
Lower and Upper Bound Adjustments Made
The landscape of microloans is booming: businesses, both large and small, cashed in on a whopping 129.7 billion rubles in microloans from MFIs in 2024, a 23% increase from the previous year. This skyrocketing debt portfolio also saw a surge, jumping 24% to 101.5 billion rubles.
The surge is all about speed and convenience: with banks lingering behind on quick cash, businesses are swarming to MFIs for their effortless funding process. A bare-minimum list of requirements and often no personal appearance are the cherry on top.
As Olesya Kiselyova, Managing Director of Lime Credit Group, puts it, "It's a digital party, and the invitees are businesses in need of a fast buck. MFIs are the life of the party, moving and grooving where conventional banks can't keep up."
According to her, microloans serve as a lifesaver for avoiding financial pitfalls, ensuring payments to employees or partners are met on time. For instance, when a café or store needs a sudden, large purchase, or a transportation company needs to quickly fix their equipment.
This theory is backed by CB data, showing that 72% of MFI loans to real-sector enterprises were used to replenish working capital.
Small and medium-sized businesses make up the majority of microloan takers, according to Olesya Kiselyova. The growing number of these businesses under MFIs' wing stood at 75,000 at the end of 2024, a 25% increase from the previous year.
Microloans are a godsend for young businesses with limited working capital, lacking a substantial credit history and valuable assets that banks would accept as collateral, notes Artem Bykov, General Director of Moneyman.
"MFIs are more open-minded and bendy than banks. When banks either reject young businesses (especially in the soul-sucking regions) or drag their heels on approvals, MFIs are all too happy to step in and lend a helping hand," he points out.
CB statistics reveal that 66% of business borrowers from MFIs are individual entrepreneurs, 28% are legal entities, and a meager 6% are self-employed. The largest increase in 2024 was among individual entrepreneurs (+33.4%), self-employed borrowers saw a 19.2% increase, and legal entities showed a more modest 9% rise.
Entrepreneurs often borrow from both banks and MFIs, according to Alexander Melnikov, commercial director of MFC "MigCredit."
"Businesses don't run at the pace of a government program; they need results now, not later. MFIs oblige, providing quick cash when it matters most," he emphasizes.
Business Dials the Interest Rate
In 2024, commercial MFIs outshone their state-owned counterparts in issuing business microloans — 73.2 billion rubles (56% of the total issuance, an increase of 11 percentage points compared to the previous year) versus 56.4 billion rubles (44%). Despite state MFIs having interest rates legally capped at 2.5 times the CB rate, commercial MFIs still pack a punch. Typical commercial interest rates start at 15% and can go as high as 70%, while state MFIs barely break the 20% mark. For comparison, banks issued short-term (up to one year) business loans at an average of 20.6%, while long-term loans landed at 16.6%.
Alexander Melnikov, commercial director of MFC "MigCredit," believes commercial MFIs' superiority partly derives from their lack of bureaucratic entanglements.
"State MFIs have a funeral procession of regulations they must follow. Commercial players, on the other hand, are sharp, agile, and make decisions at the speed of light. Yes, they may charge a premium, but things happen immediately, unlike government programs where results are as rare as a snowstorm in the Sahara," he explains.
Andrei Boger, director of the Seller Capital service, links the success of commercial MFIs to their technological prowess.
"Commercial MFIs aren't afraid to embrace the digital revolution, and it shows. Their seamless online platforms, real-time risk assessments, hassle-free loan issuance, and soup-to-nuts customer support are why businesses are lining up for a piece of the microloan action," he asserts.
Key Reason for State MFIs' Delay: They're too Old-school
One major reason for the lag of state MFIs is their outdated approach to online lending. While the digital revolution is sweeping across the MFI landscape, state MFIs are still stuck in the Stone Age. According to the Central Bank, the share of online loans in total MFI issuance reached 51% in 2024, up from 40% in 2023 and 13% in 2022.
In contrast, state MFIs' online lending share was an embarrassing 0.8% in 2024, having grown from 0.2% in 2022 and 0.5% in 2023. Meanwhile, commercial MFIs have fully embraced the digital age, with their online lending share reaching a hearty 90.3% in 2024.
Business Wants More Money in Their Wallet
Business microloans have a legal limit: according to the Federal Law "On Microfinance Activities and Microfinance Organizations," the maximum microloan amount for MFIs lending to legal entities or individual entrepreneurs is 5 million rubles. However, a bill was introduced to the State Duma in April 2025, proposing to triple this limit to 15 million rubles.
"Bumping up the microloan ceiling will help businesses diversify their funding sources, widen access to loans, and aid businesses in their expansion plans," the Central Bank's review states.
With inflation making businesses sweat and the rising cost of raw materials, equipment, and labor, increasing the microloan limits is more relevant than ever, agrees Arkady Bakushkin, director of the online MFC "Onliner."
"Inflation is like a wet blanket on SMBs (Small and Medium Businesses), increasing their operating expenses. Additionally, there's a growing demand for collateralized microloans, as secured loans are more attractive with their higher sums," says Bakushkin.
Andrey Boger from Seller Capital points out that the demand for loans is escalating among entrepreneurs as their businesses expand due to escalating consumer optimism.
"Financial marketplaces report a fivefold increase in demand for loans from the public in March 2025 compared to March 2024. MFIs of trading marketplaces increased loan issuance to both buyers and sellers by more than three times year-over-year in the fourth quarter of 2024. The current market conditions favor the scaling of SMBs, and the state should support this process," says Boger.
In his opinion, risk assessment of potential borrowers in state MFIs will undergo increased scrutiny and become more protracted, as larger sums, higher budget burdens, and greater risks for the lender are involved.
"Commercial MFIs, with greater funding access and cutting-edge tools for assessment, underwriting, and issuance, have the chance to serve bigger and more reliable clients interested in heftier sums and lightning-fast delivery," concludes the director of Seller Capital.
For more business-related scoops, tune in to our Telegram channel @expert_mag
- #Business
- #Loans
- #Microloans
- By the end of 2024, the number of small and medium-sized businesses relying on microfinance institutions (MFIs) for funding stood at 75,000, marking a 25% increase from the previous year.
- Artem Bykov, General Director of Moneyman, suggests that businesses view MFIs as more flexible than banks when it comes to lending, especially in regions where banks are notoriously slow to approve loans.
- In 2024, commercial MFIs outpaced their state-owned counterparts in issuing business microloans, with commercial MFIs' typical interest rates starting at 15% and reaching up to 70%, compared to the 20% maximum interest rate cap for state MFIs.
- In an effort to address the higher demand for funding among businesses, a bill was introduced to the State Duma in April 2025, proposing to triple the maximum microloan amount for MFIs, from 5 million rubles to 15 million rubles.
