Last 6 months Ukrainian debt collection business was developing very quickly and dramatically but mainly still in the sphere of debt collection of consumer debts.
Bad consumer debts increased 4 times since beginning of 2009, but market was steady until the moment when government paid their attention to the debt purchase sphere. In August 2009 it allowed tax remissions to banks and owing to that debt purchase became possible and reasonable business (but most likely not profitable – for now) in Ukraine.
The most debt collection companies in Ukraine greeted that event…but they didn’t know what would happen in the near future…
In several months all big collection companies in Ukraine hiddenly started establishing of debt purchase funds. Nowadays it leads to boom of debt purchase funds. Despite of only few deals were fixed in 2009, now 5 companies have debt purchase funds and 8-10 ones keep moving in this direction. Survival is the main reason of such move. Everybody realized that to survive on collection market where your competitors buy debts you must buy debts yourself. It leads to the strange situation on the market when there is no strong demand on debt purchase because of slow bank’s reaction on market changes (it seems they do not hurry to farewell with their portfolios); but offer of debt purchase exists already or to be created in the near month. Everybody understands that smaller debt collection Ukraine companies will not be able to create debt collection possibilities because of huge value – from 500 000 USD.
It means we will see battle for consumer debt collection market very soon. It will be death battle – somebody must die to balance the market…
Indirect evidence of this is break up of one from two debt collection associations - NAUCA. Its largest members defected into the stronger association (AKBU) probably hoping to take part in the dividing of market among strongest collection companies from AKBU. They left small companies of NAUCA in uncertain situation.
In addition, the president of AKBU told on public he is very pleased with long-awaited consolidation of strongest debt collection companies. This speech prophesies bad times to small ones which probably will be left outboard of big game…
The other amazing event is several facts of refusal to process portfolios from some Ukrainian collection companies in the end of winter 2010 which never happened before. As we were learnt that happened because of super bad quality of portfolios – they were processed by different collection companies up to 5 times, then passed discounting and rehabilitation procedures from the banks and then were refused to be bought by debt collectors…May be the niche of super bad portfolios is to be occupied by smaller collection companies, but in any case it will be very uncertain niche…
The death battle starts in collection business. Who knows who will reach end of 2010 and who will close operations…God thanks we look at it from our quiet haven of B2B debt collection which seems is to be far away from such shocks...
By Vitaly Shevel
GCS regional director in CIS and Baltics
March 2010
Bad debtors register is established in Ukraine
National Bank of Ukraine organized special register of bad debtors which consolidated 80% of banks’ bad loans. The main reason of such step was to provide psychological pressing at the bad debtors. Initiators of the project think that any debtor will consider risks to loose possibility to take loans in any bank before delay payments. In other hand this register collects info from banks only and the most probably it collects info about the worst and largest debtors only. So a lot of experts think efficiency of that register is low for now but it may be good instrument of risk management in the future.
In addition some market players think that this register will cause competition with credit bureaus. However credit bureaus seem to be ok with that. They tell that register collect very small info and do not provide credit history, so they expect there will be no competition.
There is no public access as well as listing of bad commercial debts in such a register so we consider that probably it will be not very effective instrument of fight with bad debts and bad debtors in Ukraine.
By Vitaly Shevel
GCS regional director in CIS and Baltics
March 2010
Monday, April 12, 2010
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