Ukrainian households borrowed roughly $1.8 billion (Hr 49 billion) in microloans between January and October 2021, according to Opendatabot. That’s $10 million more than in all of 2020.
The average loan amounted to $165 (Hr 4,500). These kinds of small loans are heavily advertised on Ukrainian TV channels, promising easy money for borrowers to make ends meet or buy expensive gadgets.
About 85% of these kinds of loan agreements are reached online. The market is exploding: in 2021, about 1.2 million loans were issued per month, compared to 983,000 in 2019.
However, despite their convenience, interest rates on microloans can add up to a staggering 510% per year on average, according to a study by the United States Agency for International Development. Borrowers often overlook this fact, thinking they can pay the money back quickly.
As a result, the total debt for overdue microloans has increased by 5% to $570 million in the first nine months of 2021.