Improved Creditworthiness of Residents Identified in Three Specific Regions by the Central Bank
Hangin' Loose in Russia: Population Debt Trends Per Region in 2024
In 2024, only three Russian regions - the Astrakhan Oblast, Crimea, and Tuva - saw an increase in population debt, according to a close analysis of Bank of Russia stats by RBC. Just a year prior, ten regions were facing this predicament.
Tuva has topped the chart for financial burden on borrowers for the third consecutive year. By year's end, the debt-to-income ratio there reached a sky-high 31.7. The Astrakhan Oblast followed closely, with a debt-to-income ratio of 16.3, higher than 2023 but lower than 2022 figures. Debt burden on Crimeans increased by a minute 0.1 points, hitting 13 in 2024, marking the second consecutive year of growth. The average debt-to-income ratio across all reported regions was 13.9, representing a 0.5-point decrease from 2023.
Besides Tuva, the areas with the highest debt burdens were Kalmykia (22.3), Karachay-Cherkessia (18.9), and Leningrad Oblast (18.8). The regions with the lowest were Kabardino-Balkaria, Kamchatka, Sakhalin, Dagestan, Chechnya, and Zabaykalsky Krai (ranging from 10 to 10.5).
Did You Know? While not explicitly stated in the original article, data analysis reveals a trend of borrowers moving away from conventional banks and gravitating toward microfinance institutions (MFIs) as their lending options become scarce. This shift could be due to their accessibility, as MFIs frequently cater to high-risk borrowers rejected by traditional banks.
RBC calculates debt as the ratio of the average debt per borrower in a region at the beginning of the year to the average monthly income in that region during the previous four quarters. This analysis has been conducted since 2022. Unfortunately, data for four new regions - the Donetsk and Luhansk People's Republics, and the Kherson and Zaporizhzhia Oblasts - were not included in the statistics. In 2023, the Central Bank also did not provide debt assessments for Buryatia and the Zabaykalsky Krai, making it impossible to evaluate the dynamics of the indicator in these regions. In 2024, the debt burden in Buryatia was 15.9, and in Zabaykalsky Krai, it was 13.3.
The improvement in the debt situation of residents in most regions coincides with the general trend - the number of active borrowers in Russia started to decrease significantly last year. As of January 1, 2025, 50.1 million Russians had loans from banks and loans from microfinance organizations (MFOs), according to the Bank of Russia. In the fourth quarter, this part of the client base of banks and MFOs decreased by 700,000 people - the highest outflow recorded since the publication of these statistics, starting from 2022. The number of Russians with loans has been increasing almost all the time, except for the second quarter of 2022, when the crisis peaked.
Troubled Waters Ahead? According to CB data, there was a shift in the trend of increasing the number of serial borrowers - those who are paying off more than one loan simultaneously - over the past year. As of January 1, this group consisted of 23.1 million Russians, with their numbers decreasing by 3.3% over the quarter. However, serial borrowers still account for more than half of the client base with loans, with their total obligations amounting to 72.4% of all population debt to banks.
The number of borrowers with secured loans has increased. In 2024, the number of mortgage borrowers grew by 200,000, reaching 10.2 million people, while the group with auto loans increased by 50%, reaching 2.7 million citizens. These client segments expanded throughout the entire past year. In the fourth quarter, the number of Russians paying off cash loans decreased by 1 million people, or 4.4%, to 21.5 million. The number of credit card holders decreased by 200,000, reaching 28.4 million consumers. This instantaneously affected indicators such as the average number of loans and the average debt per borrower - Russians became less likely to supplement their mortgage with another consumer loan. The share of those taking cash loans before a mortgage fell to the lowest levels ever recorded - 4%.
Young Blood In 2024, the share of clients under 20 years old increased across all types of credit products. This is most noticeable in credit cards - if previously, 4% of credit card holders were considered young, by the beginning of this year, this figure had risen to over 12%. 1.6% of mortgage holders in Russia are citizens under 20 years old, a figure that the CB did not even report in its statistics a year ago.
Clients are moving to MFIs, as the number of borrowers in Russia is decreasing due to those served by banks. In the second half of 2024, the number of borrowers with only bank loans decreased by 1 million people, while the group of citizens with loans from MFIs increased by 500,000. The debt burden of MFI clients has increased, with the share of consumers taking five or more microloans increasing by 3 percentage points, to 13%, over the year. The average debt amount of MFI clients reached 58,500 rubles, representing a 11.7% year-over-year increase.
Finance
For the first time, Russians borrowed more from MFIs than from credit cards
The decline in the number of borrowers, especially those with cash loans and credit cards, is a direct result of the Central Bank's macroprudential policy, believes Egor Lopatin, director of the financial institutions rating group at the NCR agency.
"Both high interest rates, which have reduced demand for credit products from consumers, and regulatory restrictions that have affected banks' risk policies, have had a significant impact," Lopatin muses.
"Both high interest rates, which have reduced demand for credit products from consumers, and regulatory restrictions that have affected banks' risk policies, have had a significant impact," Lopatin muses.
This refers to macroprudential add-ons that apply to all segments of lending - unsecured loans and credit cards, mortgages, auto loans, and loans secured by vehicles. These add-ons discourage banks from lending to clients with high debt-to-income ratios (DTI). Additionally, for cash loans and credit cards, there are direct quantitative limits - macroprudential limits (MPL). Banks cannot exceed threshold values for issuing loans with high DTI. Starting July 1, 2025, MPLs will begin to apply to mortgages and auto loans.
Experts surveyed by RBC believe that this trend will continue.
"Given the regulator's medium-term forecast, tight monetary conditions will persist throughout 2025, which means we can expect a further decrease in household debt. Banks need to comply with the regulatory requirements of the Bank of Russia, including capital adequacy with the anticyclic buffer, so it is unlikely that they will ease their risk policies in the medium term, both in unsecured retail and in mortgages and auto loans," Lopatin muses.
"Without significant positive changes in macroeconomic indicators, the Bank of Russia is unlikely to change its approach to cooling credit," agrees Borodulin. He also notes that it's too early to talk about a significant reduction in Russians' debt burden.
"Clients, due to tightened requirements, may turn to microfinance organizations (MFOs) and other lending institutions after being rejected by banks," the analyst argues.
Sociologists report on the credit market for "rejected" clients in Russia Sociologists report on the credit market for "rejected" clients in Russia. The shift of borrowers from banks to MFIs has been and will continue, even with the alignment of regulatory requirements for different market participants, believes Mekhtiev. "MFOs are much more technologically advanced in online lending to new clients than any bank. That's why banks started creating their own MFOs to keep up in the 'tech race.' The risk he sees from increased regulation is borrowers turning to illegal lenders."
- The finance industry has observed a shift in borrowing patterns, with individuals moving away from traditional banks towards microfinance institutions (MFIs), potentially due to the limited lending options offered by banks.
- In 2024, the debt burden on the average borrower in Russia, as evaluated by the ratio of average debt per borrower to average monthly income, decreased by 0.5 points compared to the previous year.
- In 2024, the regions with the highest debt burdens, besides Tuva, included Kalmykia, Karachay-Cherkessia, and Leningrad Oblast, while the regions with the lowest debt burdens were Kabardino-Balkaria, Kamchatka, Sakhalin, Dagestan, Chechnya, and Zabaykalsky Krai.
- The decline in the number of borrowers, especially those with cash loans and credit cards, can be attributed to the Central Bank's macroprudential policy, which has resulted in high interest rates and regulatory restrictions that impact banks' risk policies.
- The number of borrowers served by banks decreased by 1 million people in the second half of 2024, while the group of citizens with loans from MFIs increased by 500,000 during the same period.
- The average debt amount of MFI clients increased by 11.7% year-over-year, and the share of consumers taking five or more microloans increased by 3 percentage points.
- Experts anticipate that the trend of decreasing household debt will continue throughout 2025 due to tight monetary conditions and regulatory requirements that banks must comply with. However, without significant positive changes in macroeconomic indicators, there is uncertainty regarding a significant reduction in Russians' debt burden.
