Growing popularity of peer-to-peer lending platforms in consumer credit market
In the first quarter of 2017, new consumer credits granted to residents continued to decline in number; however, peer-to-peer lending platforms, which also grant this credit, increased their lending volumes fast.
‘The first quarter of this year basically reflected the general trends in 2016; intensified activity of peer-to-peer lending platforms is being observed however. This sector, which now holds one-tenth of the market of consumer credit without collateral, has been growing fast, while the Bank of Lithuania will closely monitor that the operators of these platforms ensure adequate protection of both investors and borrowers,’ says Aistė Tavorė, specialist of the Financial Services and Market Supervision Department of the Bank of Lithuania.
In the first quarter of 2017, thirty consumer credit providers (other than credit institutions) and three peer-to-peer lending platforms granted 105 thousand new consumer credits in the total amount of EUR 77 million (a decline of 20.5% and 12.8% respectively quarter on quarter). Compared to the first quarter of last year, new consumer credits granted declined by 15 per cent in number, but their amount rose by 6.9 per cent.
The most pronounced changes are related to the activities of peer-to-peer lending platforms. They granted 1.8 thousand consumer credits in the total amount of EUR 3.9 million, whereas a year ago, 1.2 thousand consumer credits were granted, in the total amount of EUR 1.7 million. Both those wishing to lend and to borrow via a peer-to-peer lending platform grew evenly in number: the number of investors stood at 12.4 thousand at the end of March this year (an increase of 6.6 thousand year on year), while that of consumer credit borrowers – at 6.5 thousand (a year-on-year increase of 3.5 thousand).
Consumer credits overdue have declined markedly in consumer credit issuers’ loan portfolios. For example, at the end of the first quarter of 2017, there were 98.4 thousand consumer credits overdue for more than 60 days, whereas as of 31 December 2016 – 118.1 thousand. This decline in consumer credits overdue over the quarter was driven by the sale of terminated consumer credit agreements to debt recovery companies.
Credit without collateral (both less and more than EUR 290) remains the most expensive type of consumer credit; however, its cost continues to decline, while maturity is lengthening. For example, the annual percentage rate of charge for consumer credit dropped from 79.2 per cent to 65.8 per cent, while the average interest rate – from 45.6 per cent to 41.2 per cent. Meanwhile, the average duration of this credit has lengthened by a third, from 18 to 24 months.
During the first three months of this year, the Supervision Service of the Bank of Lithuania fined one consumer credit issuer for breaching the provisions of the Law on Consumer Credit and eliminated another one from the List of Consumer Credit Providers. One peer-to-peer lending platform operator was given a notice.
Consumer credit market statistics for the first quarter are available here (in Lithuanian).