FX.co ★ Seven reasons for growth in consumer lending

This month, despite stagnation in the Russian economy, experts has recorded a robust growth in consumer lending. They tried to figure out the reasons for this phenomenon. Experts have identified a number of items that contribute to the boom of Russian consumer lending.

Excess liquidity of banks

According to the central bank of Russia, for the seven months of 2018, retail lending has grown by 13%, compared to a 4.5% growth in corporate lending. By the end of the year, lending to individuals in the Russian Federation is expected to increase by 20%, while corporate lending is expected to grow only by 6-7%. According to the regulator, experts estimate the amount of "excess" money in the banking system at trillions of rubles. In this situation, lending is the most profitable and appropriate way out for banks. Excess liquidity is primarily directed to provide money to individuals.

Material welfare of individuals in comparison with legal entities

Banks consider the financial position of households to be more stable than that of most organizations. With a low unemployment rate, a moderate growth in wages is observed among individuals. Many expect further increase in wages, which contributes to the willingness to borrow. Confidence in the financial stability and banks' incentive programs, such as mortgage lending, increase the attractiveness of borrowed money.

Growth in individual consumption level

Experts note that this year, consumer activity of households has sharply increased compared to corporate one. In the first half of 2018, the volumes of consumption of goods and services in Russia increased by 2.6% to 14.5 trillion rubles. Analysts attribute this to improved consumer sentiment and everyday product output, which are financed mainly through loans.

Solving current problems through loans

Many customers require money for current needs, and they can not solve their problems without borrowing loans. For the corporate sector, there are different ways of financing: bonded loans, income from investment, etc. The consumers have much less alternatives, especially against the background of lower deposit rates. As a result, they have to borrow. Many are attracted by the fact that consumer loan can be obtained at low rates.

It is more convenient for banks to work with individuals

Loans for individuals are considered by banks to be more suitable in terms of compliance with regulatory acts of the central bank. In order to make a decision on lending to a financial institution, it is necessary to confirm the client's solvency. For individuals, it can be confirmed by an income certificate, and for legal entities, it requires longer inspections. In addition to data on incomes of individuals, it is enough for a bank to enter a number of parameters into its evaluation system such as marital status, education, existence of the property, and others. The system will automatically provide a pass or fail decision.

Dominance of major banking players in the retail market

The lion's share of the retail banking market in Russia is controlled by Sberbank, VTB, Alfa-Bank, and other leading organizations. This is due to the large volume of their own capital, which is sufficient to cover any risks. Smaller financial institutions are not able to create large financial reserves and have to work with low risk borrowers. Expert note that this is really not necessary for major banks.

Increased requirements for borrowers

The list of requirements for obtaining a consumer loan is constantly being refined and improved. According to experts, some of them have been greatly simplified. In particular, the set of documents was reduced and the requirements concerning minimum years of experience were eased. Experts consider a credit application through special services and positive credit history to be a good way to obtain a loan, and expect a growth in consumer credit in the future.