The international market for consumer online lending is represented by 2 main spheres: payday loans (instant loans, quick and convenient for customers) and installment loans (short-term loans up to a year with partial repayment). At the moment, the payday and installment loans market is still in its developing, as evidenced by the appearance of major players every year.
The lowest ratio of the amount of microcredit to GDP per capita is observed in:
- Germany (6%);
- France (11%);
- Switzerland (12%);
- Great Britain (16%).
This percentage rate is equal to 100% in Hungary and Poland. The microcredit market in Poland is currently one of the most developed in the world, along with the US and UK markets. In Poland, more than 60 microcredit companies are represented.
About 350,000 loans are issued in the United States every day. At the same time, the maximum interest rates in the United States can reach 3% per day. In 2004, California had more microfinance companies than McDonald’s and Burger King restaurants. The average microfinance loan in the United States is $ 9,732, which is ten times greater than the average microfinance loan in developing countries (the US $ 973).
In most countries of Europe and the USA, microcredit organizations can be used by persons over 21 years of age. Microcredits are most actively issued before holidays and vacations, and the decline is usually observed in the summer months.
The purpose of microfinance organizations in Europe and the USA: financing small businesses and personal needs of citizens
Americans take short-term loans to earn much more funds. Small business loans allow owners to more effectively manage their operations without interrupting production processes. At the same time, 67% of borrowers demonstrate a significant increase in their income as a result of “timely insurance” of the business.
In Europe, most microfinance organizations offer only microcredit business, 1/3 provide financing for business and personal microcredit. Very few microfinance organizations offer exclusively personal payday loans. In spite of the fact that personal payday loans show noticeable growth, a large part of the portfolio (71%) is allocated for business microcredit. The financial support of the European Union is focused on organizations that finance loans to generate income, rather than personal needs of clients.
Microcredit terms vary widely among European countries. The average annual interest rate on business microcredit varies from 3% in Poland and Finland and can reach 28% in France and Serbia. As for personal microcredit, the interest rate on this type of loan can vary from 4% (in Italy and France), and up to 41% (in the UK). The difference is associated with differences in legislation and the degree of state regulation of conditions for issuing a microloan.
Portrait of a foreign borrower looks in the following way:
- age: 21-25 years – 23%, 26-40 years – 50%, 41-60 years – 21%, over 60 years – 6%.
- marital status: unmarried/single – 59%, married – 36%, divorced – 5%.
- a number of microloans per year: 7-10.
- average amount: personal microloan – €1.500; business microloan – €7.000. In the US, the average loan ranges from $500 up to $4.000.
- average term: personal microcredit – 30 months, business microcredit – 41 months.
- average interest rate: personal loan – 19%; business microloan – 10.7%.
Category: General Issues
Tags: Business, financial, loan