The banking system has seen an increase in consumer lending since the beginning of 2023. Most Ukrainians use credit funds for daily needs, purchase of household appliances, furniture, medical treatment, clothing, and utility bills. This opinion was expressed by Andriy Dubas, President of the Association of Ukrainian Banks (AUB), in an exclusive commentary to UNN.
We see an upward trend across the banking system. If we take all the consumer lending banks, starting from 2023, we constantly see an increase in consumer lending in the system
According to him, consumer lending is growing almost every month, which is not the case with business lending. According to Dubas, the situation there is a little different: there is lending growth, but the dynamics is less than in consumer lending.
He added that consumer loans have higher interest rates because they are usually high-risk, unsecured, and the decision to grant them to a consumer is made rather quickly.
"Different banks offer different interest rates, but if you look at the whole picture, the interest rates range from 30% per annum to maybe 50% per annum, depending on the bank, the program, the terms, the fees, and so on," Dubas said.
He also noted that the market for non-bank consumer lending is developing rapidly in Ukraine. According to a study, conducted by the UBA on consumer microcredit, more than half of the respondents reported that they take out loans for daily needs, or so-called "payday loans" if unexpected expenses arise.
The second place goes to the purchase of household appliances, furniture, medical treatment, medicines, clothing, and utility bills.
Today, the Ukrainian financial sector in general and the banking system in particular are highly developed compared to other countries. There are mobile banks in Ukraine, as well as banks that offer "mixed" card programs - when a customer has a debit card with a credit limit. They are in demand, and Ukrainians can always count on their bank in the sense that if unexpected expenses arise, the client can always use their credit limit and, so to speak, quickly get back on track in the economic and financial sense. That is, to cover an urgent need and continue their usual activities
Regarding the return of loans to the banking system, both consumer loans and those received by entrepreneurs, Dubas noted that, given the wartime and challenges Ukraine is facing today, the share of non-performing loans is "at an acceptable level.
"Today, the NPL ratio is about 36% For Ukraine, this is more or less acceptable, because we are now in the midst of a full-scale military aggression by Russia. If we use the indicators that we had before the full-scale invasion for comparison, we have been constantly reducing the share of non-performing loans in the banking sector. For example, compared to 2016, when there were almost 60% of non-performing loans, with the beginning of the full-scale invasion, this share was approaching 25%," Dubas explained.
At the same time, he said, in the context of non-performing loans, attention should be paid to whether they are held by a state-owned or private bank. The President of the Association of Ukrainian Banks is convinced that if this approach is used, the situation will look better.
"If this figure is divided into banks with state capital, for example, PrivatBank, and banks with foreign and private capital, the situation becomes much better. The share of non-performing loans in banks with private capital and banks of foreign banking groups has been around 10% since the beginning of the full-scale invasion, which is an acceptable figure. PrivatBank has the worst statistics in the overall picture - it has a very high share of non-performing loans, but it is gradually decreasing," Dubas said, adding that this situation was caused by the nationalization of the financial institution and the state-owned bank inherited non-performing loans.
In addition, the statistics of non-performing loans in state-owned banks are also negatively affected by those issued earlier, for example, in 2010 and still not repaid, Dubas added.
Recall
Olena Sosiedka, co-founder of Ukraine's first fintech ecosystem Concord Fintech Solutions, previously told UNN what to look for to protect yourself from losing money when taking out a loan from a bank. In addition, the expert gave advice on how to prevent the risks associated with obtaining a loan and choose the right bank to take out a loan.