Microcredit is a loan provided to a client at interest for a short period. The main features of microloans are a small amount and a short lending period. Despite the fact that the maximum amount of a microloan for an individual is limited to UAH 1 million, the average size of such loans issued in the first quarter of 2024 was UAH 11.1 thousand.
Getting a microloan is easier than getting a regular bank loan, but the rates on such products are much higher. Therefore, they are usually issued for urgent needs.
Microfinance companies do not impose strict requirements on clients. Even applicants with low credit ratings can take advantage of microlending.
Who issues microloans?
Services on the microfinance market are provided by:
- Microfinance organizations (MFIs).
- Consumer cooperatives.
- Pawn shops.
The National Bank controls the activities of such organizations. It is also responsible for forming the state register of microfinance market participants.
Types of microloans
The types of microloans are not legally defined. However, in practice they are classified by the method of issuance, the availability of collateral, and the category of borrowers. Depending on this, the following microloans are distinguished:
- To the card: this type of loan can be applied for remotely and received by transfer to a bank card.
- To an electronic wallet: it is made online, the funds are transferred to the electronic wallet.
- In cash: it can be obtained at the company's office. When applying in person, the client can expect a larger loan amount.
- Collateral: microloans are provided against the collateral of jewelry, watches, phones, and vehicles.
- For individuals: individuals can receive up to UAH 1 million from MFIs.
- For business: loans up to UAH 5 million are available to legal entities.
Separately, we can highlight POS loans, which are issued at points of sale: stores, hypermarkets, etc. If the buyer does not have enough funds, he is provided with a microloan to purchase goods.
Pros and cons of microloans
The main advantages of microfinancing are the speed of processing and a high probability of approval. You can get a microloan in a few minutes. To do this, you do not need to collect a package of documents and have a high credit rating.
The main disadvantages of microloans:
- Rates are higher than on bank credit products.
- You will have to pay large fines for late payment.
Therefore, microloans can only be used in emergency cases when money is urgently needed for a short period of time.
How is a microloan different from a loan?
Loans are provided by banks, and microloans are provided by microfinance organizations. Banks offer customers more favorable terms:
- Low rates.
- Large amounts. Typically, banks allow you to get a consumer loan for up to UAH 7 million, and with collateral, up to UAH 30 million.
- Long lending terms. Depending on the loan program, the term of bank lending can be up to 20 years.
Banks are more careful in selecting customers when approving loans. They strictly assess credit history, check the borrower's documents, and ask for proof of income.
As an alternative to microloans, banks offer credit cards. They have an approved credit limit that can be used if necessary.
Who are microloans suitable for?
All clients of microfinance organizations have one common characteristic - a relatively low income level. The poorer segments of the population usually live in cities with a population of up to 250 thousand people, as well as in villages, towns and small towns. Experts note that most MFI offices are located in provincial settlements. While Kyiv, Lviv, Dnipropetrovsk and Odesa regions account for only about 81% of such organizations. If a borrower lives in a large city, most likely he lives in one of its remote areas.
Meanwhile, the share of clients from remote regions is increasing, while the number of borrowers from large cities is decreasing.
As for the professional composition of MFI clients, they can mostly be found among representatives of sectors where salaries are often lower than average: construction, the budget sector. The positions that borrowers mostly occupy include salespeople, cashiers, and low-skilled workers.
This distribution of microfinance clients demonstrates typical features of the socio-economic situation in the country. At the same time, this phenomenon also raises the question of the accessibility of financial services for people with limited incomes, requiring additional analytical efforts for a more accurate understanding of economic processes in society.
The main reasons why clients apply for microloans can be classified into several groups. First of all, money is needed to solve urgent problems - to pay for housing and utilities, buy food or medical services. This reason is most common among borrowers in small cities and amounts to about 35% in total, while in Kyiv this figure is only 10%.
The second most common reason is large, but not urgent purchases, such as apartment renovations or buying a new phone, as well as organizational expenses (for example, children's graduation). This reason unites about 60% MFI clients in the capital and 30% in small towns.
Thus, statistics confirm that a typical MFI client in Ukraine is a man around 35 years old, living in a small industrial town. He already has a debt with a bank, and he needs a new loan from an MFI to cover unforeseen expenses - from buying winter shoes to emergency treatment.
Rating of microfinance organizations in Ukraine
In Ukraine, there are many online services where you can apply for a microloan, and if you are just starting to get acquainted with this area, the choice may seem difficult. To help with this matter, we have prepared Ukrainian MFI rating, focusing on reviews of real users. This will allow you to make the right choice among the many microfinance organizations on the Ukrainian market.
Moneyveo
Moneyveo is a pioneer in the field of online lending in Ukraine and one of the largest participants in this market. Constantly included in the TOP-5 reliable MFIs and it is in this review that she takes first place, which is an absolutely deserved assessment of her work.
The company's customer base is about 1.35 million people, and the total number of loans issued exceeds 7.6 million. Many users remain loyal to the company due to its convenient service and attentive attitude towards customers.
The Moneyveo website is well thought out and easy to use. The relevance and accessibility of information on it play an important role in evaluating services, because this site is the main source for the client.
On the first screen of the main page there is a calculator that answers most current queries, such as interest rates, loan terms, and possible overpayments.
CreditKasa
CreditKasa remains one of the market leaders due to its stable positions in the rating. The BankID system is integrated in such a way that clients can register without filling in details manually. Also, for the convenience of clients, the company offers many ways to repay loans: through a personal account, bank cash desks, self-service terminals and online banking. Help is also available via online chat and messengers, which allows you to quickly receive the necessary information.
Credit7
The company's website looks quite user-friendly and provides all the necessary information at a glance. On the main page, clients can immediately find out how much they can get and under what conditions, which allows new and regular users to make a quick decision.
Also, further down the page you can find a detailed explanation of the process of obtaining a loan and the procedure for its repayment. The "Help" section contains all the information necessary for applying for a loan, and if necessary, users can contact the support service via online chat or one of the popular messengers.
Each client who applies for a loan of UAH 1,000 or more will have a chance to win a cash prize of UAH 50,000. In addition, another 50 participants in the campaign will have the opportunity to apply for a loan with a big discount.
SelfieCredit
It is worth noting that although BankID is used for authorization in the service, it does not allow users to perform other operations through this system, and the mobile application is only available on the Android platform.
Despite these shortcomings and the fact that it is relatively new MFI, the SelfieCredit service demonstrates excellent quality of service. It should be noted, in particular, an intuitive website with a minimalist design, which makes it easy to navigate and find the necessary information without unnecessary elements. Information about the company, lending, as well as how the loan is repaid and extended, is presented in an accessible and understandable format, which undoubtedly deserves praise.
Another advantage is loyalty. New users can take advantage of the opportunity to get their first practically free credit, and regular customers regularly have access to various promotions and bonuses. For example, among the latest SelfieCredit offers is a raffle of an EcoFlow charging station, a Power Bank, and discounts of up to 90% on repeat credits.
How to choose the right MFI?
There are more than five hundred companies on the Ukrainian market of microfinance organizations, and choosing the right service can be quite a difficult task. It is advisable to choose an organization that will provide the best conditions, convenient service, and will not let you down at a critical moment.
When choosing a microfinance organization (MFI), it is important to pay attention to several key aspects in order to avoid unpleasant situations and make a truly profitable choice.
First of all, you should pay attention to the total cost of the loan. This indicator includes not only the interest rate, but also the costs of other services provided under the contract. Therefore, it is important to consider all possible additional costs that may arise when using the loan.
The second factor is the lending conditions, which can vary significantly between companies. It is important to compare not only interest rates, but also the methods of obtaining a loan, the requirements for the package of documents and the features of the process of obtaining funds.
Pay special attention to the terms of the contract. In particular, you need to check whether the proposed payment schedule is suitable and can be correlated with your regular income. In addition, you should assess your financial capabilities in advance so that you are prepared for possible fines or penalties in case of late payments.
It is equally important to check the company's details. Find out about its registration data, including TIN, as well as legal and actual addresses. This will allow you to verify the legality of the MFI and avoid possible risks.
Before signing any contract, you need to check whether the organization is included in the state register of MFIs. This can be done on the official website of the National Bank of Ukraine. Such a check guarantees that you are dealing with a licensed enterprise, which reduces the risk of falling into the clutches of fraudsters.
Don't forget to pay attention to the reviews of other customers and the company's partner network. This will help you understand how reliable the organization is from practical experience. Information from other borrowers and reviews about the company's work will give you additional confidence in your choice.
Risks of microcredit
The growing popularity of microcredit has certain risks that become apparent in the context of modern financial and economic processes. Among the population that takes loans, about 40% of their monthly income goes to servicing debts, in particular on microloans, consumer loans or mortgages. This number shows a negative trend, when the need for loans outstrips the ability to repay them.
During economic restructuring, when some producers leave the market and others adapt to new realities, there is a time gap between the old and new place of work. This becomes one of the reasons for the temporary inability to pay debts, as banks are reluctant to defer payments or restructure.
The very situation with the growth of microcredit often leads to social tension, as people find themselves in a critical situation, unable to repay their debts. Looking for new sources of income, which do not actually exist, creates even more difficulties, so it is worth reducing debt and taking out loans only in case of real need.
Microcredit provides the country's residents with a convenient tool for solving urgent financial problems. It allows you to get the necessary funds without lengthy procedures and high requirements for borrowers. However, high interest rates and a high probability of financial penalties in case of delay make you treat this tool with caution. The use of microcredits should be justified and not be accompanied by unnecessary credit obligations.
