Debt spiral. Fintech expert explained the dangers of quick loans

The rapid increase in the number of microloans among Ukrainians indicates a deepening crisis of solvency of the population and a complication of access to bank lending. This opinion was expressed in an exclusive comment to UNN by fintech expert and co-founder of the first fintech ecosystem in Ukraine, Concord Fintech Solutions, Olena Sosiedka.

Context

Earlier, UNN reported that in the first quarter of 2025, Ukrainians took out more than 2.17 million microloans for UAH 12.72 billion. This is 8% more than in the same period last year. In total, they borrowed UAH 12.72 billion from non-bank financial institutions (MFIs). The average loan amount decreased to UAH 5,858, and the total debt reached UAH 24.28 billion.

Details

The situation with microfinance lending in Ukraine is becoming threatening. In the first quarter of 2025, Ukrainians took out microloans for UAH 12.72 billion - and this is only new borrowings. At the same time, the total amount of debt to MFIs has already reached UAH 24.28 billion, which is twice as much as it was at the beginning of the full-scale invasion. That is, both new loans and the amount of outstanding debt are growing

According to her, this indicates several deep-seated problems. The first is the complication of access to traditional lending. "Although the number of bank loans is growing, banks are increasingly cautious in assessing risks, and for many Ukrainians, after losing property, jobs or stable income, bank loans have become unattainable," said Olena Sosiedka.

In addition, in her opinion, a large impact is the decrease in the financial stability of households. "The population turns to non-bank institutions, that is, takes so-called quick loans, in order to cover urgent household needs: treatment, rent, elementary survival," explained the fintech expert.

Olena Sosiedka also noted that the regulation of the financial sector is not effective enough. Despite the efforts of the National Bank, semi-grey schemes are still operating in the market, and the terms of agreements for "quick money" often include hidden commissions and inflated fines, which leads to "debt pits".

MFIs actually perform the function of "financial ambulance", but their business model is based on high risk and significant interest rates. That is, this means that in the absence of alternatives and proper financial literacy, Ukrainians are increasingly plunging into a debt spiral.

"The lion's share of such debts are the so-called payday loans, which are often re-closed with new loans. This creates the effect of a debt pyramid, and in fact there is no repayment, and interest only accumulates," said Olena Sosiedka.

In order to regulate the situation, the fintech expert proposes to strengthen the regulation of MFIs in the first place. In particular, to ensure mandatory disclosure of the real annual interest rate, as well as to limit the maximum debt burden on the borrower and prohibit aggressive debt collection practices.

In addition, according to Olena Sosiedka, it is worth working on the introduction of an effective mechanism of debt amnesty or restructuring for vulnerable groups of the population.

More attention should also be paid to the financial literacy of the population and explain the consequences of overdue debt repayments, as well as the system of interest accruals

"If we do not intervene now, the consequences of the debt crisis may become even more dramatic for millions of Ukrainians," Olena Sosiedka stressed.

Let us remind you

In May, the National Bank of Ukraine reported positive banking trends: lending to businesses and loans to the population are growing. In the first quarter of 2024, Ukraine saw an accelerated growth of hryvnia lending to businesses and high rates of growth in loans to the population.