The non-banking sector of the credit market in Ukraine: vectors of expansion

The article summarizes the current trends in the development of credit relations in Ukraine considering institutional aspect. It was determined that in the process of establishment and development of credit relations in Ukraine, the biggest expansion was obtained by bank lending with high market concentration indicators. Before the beginning of the financial and economic crisis, the well activity of the Ukrainian credit market provided financial stimulation of the country’s economic growth by increasing consumer demand, financing of the construction industry and industrial production. However, the weak internal resource base of the domestic financial market, the underdeveloped institutional infrastructure, the longstanding tight regulator’s monetary policy after beginning of the crisis and decreasing the level of confidence in banking system, led to the freezing of banking lending.

Under these conditions highlighted the trend of increasing of the non-bank credit institutions’ activity. During the past three years these institutions were able to increase their credit portfolios for the mass demand of the households for consumer lending. Despite positive signs of activation of the non-banking financial sector of Ukraine, the high rates of non-banks’ credit portfolio growth and the extra-high interest rates on consumer loans give reasons to talk about the danger of forming preconditions for the debt crisis for households. In these conditions, efforts should be focused on eliminating institutional insufficiency for the providing development of investment lending and reducing the cost of loans. To do this, it is necessary to solve problems in the legislation to make it impossible to sell the pledges, using the hedging instruments, and to stimulate the development of infrastructure institutions in the credit market. It requires attention of the government, regulators and experts to monitor the risk of excessive debt burden on households.

At this stage, it is necessary to increase the transparency of the consumer lending segment of the market, both banking and non-banking, and to consider the possibility to provide legislative limitation on level of interest rates and other limits for consumer loans hereafter.