Determinants of the Demand in the Market for Online Microcredit in Russia

The study examines the demand for online microcredit in Russia using cross-sectional data of 2015 from one of the largest online microlending entities in the country. Specifically, the paper aims to test the hypotheses suggested by the previous literature and to compare the demand differences between 2 main groups of customers: first-time and repetitive borrowers. Heckman two-stage procedure, in the form of Maximum Likelihood estimation, was applied to explore endogeneity issues, common for such types of the researches. This method also allowed us to split the process of obtaining a loan into 2 sequential steps: decision-making and then the choice of the loan size. As a result, we managed to obtain the elasticities of demand with respect to interest rate, maturity and income. We also observed that macroeconomic factors are significant for a decision-making of the first-time clients only, while the regular clients establish a loyalty pattern towards the MFO and base their decisions mostly on their prior experience. On the other hand, the direct demand function has similar determinants for both groups but the magnitude of these impacts is different.