Gatherers Have Put in Sweat Equity
Lending Tides Shifting in Russia as Collection Agencies Hit Record Highs
In 2023, collection agencies in Russia have seen a significant surge in overdue debt payments, with more than 280,000 individuals settling their debts within the first nine months of the year, according to Forbes' latest report.
Data from the National Association of Professional Collection Agencies (NAPCA) reveals that the total amount collected from these debtors has already surpassed 17.5 billion rubles, surpassing the entire 2022 collections (19 billion rubles) and closing in on the 2021 figures (15 billion rubles).
This striking escalation is attributed to the growing number of portfolios in the hands of collection agencies. In 2022, creditors put up a staggering 269 billion rubles worth of overdue debt for sale, with the volume of closed deals reaching an impressive 210 billion rubles. By the end of the year, NAPCA predicts this figure will skyrocket to 293 billion rubles, with collection agencies set to purchase 262 billion rubles worth of debt.
But why this sudden surge? Summers typically see fewer payments from borrowers, but towards the end of the year, employers often release bonuses and premiums, which debtors use to settle their obligations. However, Semen Nikolaev, an arbitration manager and founder of YURL Group, notes that the rise in payments to collection agencies isn't necessarily a sign of borrowers suddenly becoming more conscientious about their debts.
Nikolaev attributes the increase in payments largely to two factors. First, banks and microfinance organizations are tightening their lending conditions, resulting in higher interest rates and overall overpayment. Consequently, more borrowers find themselves in precarious situations, with their debts being transferred to collection agencies.
Secondly, Nikolaev emphasizes that the improvement in debt collection methods used by collection agencies, along with new technologies, underscores their growing efficiency and income from debt collection. He predicts an ongoing growth in collection agency activity and the emergence of new major players in this market, potentially offset by greater regulatory oversight of the sector.
Additionally, Nikolaev sees digital technologies such as artificial intelligence and big data processing as playing a critical role in this evolution. These advancements will empower collection agencies to refine their debt recovery strategies, making them more effective and profitable.
It's worth noting that debt sales represent a lucrative business opportunity for creditors, boosting profits in an economic climate marked by economic challenges, high commodity price volatility, and sanctions.
Collection agencies in Russia are expected to purchase a record-breaking 262 billion rubles worth of overdue debts by the end of 2023, signifying a surge in loans that have gone unpaid. This increase is attributed to stricter lending conditions from banks and microfinance organizations, leading to higher interest rates and increased debts being transferred to collection agencies.
