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Zaymer is one of the largest Russian microfinance companies, issuing small consumer loans over the internet with no need to visit an office. The lending decision is made by an automated scoring system. The shares trade on the Moscow Exchange under the ticker ZAYM.
Microloans are small sums lent for a short term to borrowers whom a bank has turned down. The interest rate here is incomparably higher than a bank's, and that is not greed but arithmetic: a significant share of these loans is never repaid at all, and the interest on the loans that are repaid has to cover the losses on those that are not.
Hence the company's key skill is not lending but selection. A scoring model decides who gets a loan and how much, within seconds and without human involvement; the quality of that model directly determines how much money comes back.
Regulation here is strict and keeps getting stricter: the law caps the maximum interest rate, the maximum amount of overpayment and the number of loans per borrower. Each of these restrictions changes the economics of the industry directly.
Small payday sums, lent for terms starting from a few days.
Larger sums repaid in instalments over several months.
Automated assessment of the borrower and the handling of overdue debt.
Strengths and weaknesses describe the business itself. Opportunities and threats describe what may happen around it.
It issues small consumer loans over the internet: the application is submitted online, the decision is made by an automated system, and the money arrives on the borrower's card. The company has no offices for issuing loans.
Because a significant part of these loans is not repaid. The interest on the loans that are repaid has to cover the losses on those that are not — otherwise the model does not work. The borrowers here are those whom a bank has turned down, and the risk is correspondingly high.
An automated assessment of the borrower based on a large number of attributes, after which the system decides whether to issue a loan and for what amount. In microfinance, the quality of scoring is the main driver of profitability: these decisions are not made by a human.