SMS loans are becoming a national problem for Estonia
30.04.2008, 08:15
Although providers of SMS loans charge up
to 1,000 percent a year in interest, almost one in every ten Estonians has
applied for such a loan.
Eesti Päevaleht writes that the SMS loan business is about to become the most
lucrative business for loan providers that expect their business to grow at
least 20 percent a year.
“This is a medical problem,” says Marje Josing, head of the Estonian
Institute of Economic Research EKI, adding that it seems that Estonians have no
economic sense and cannot calculate the skyhigh interest amount.
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It only two years since that the first companies started to offer SMS loans
in Estonia this has grown into a business worth at least a billion kroons.
“The results of the first three months allow me to believe that we will issue
at least twenty percent more loans this year,” said Aare Sosaar, CEO of market
leader SMS Laen. He added that the business is growing so rapidly that it is
very difficult to make any forecasts.
It is believed that the market share of SMS Laen is more than 50 percent in
Estonia. There are about ten companies offering SMS loans in Estonia today.
Since about 10 percent of the people who have taken an SMS loan have problems
in repaying the debt, this means that also debt collection agencies have plenty
of business.
“The number of small borrowers in trouble is increasing,” confirms Jaanus
Laidvee from debt collection agency Julianus Inkasso. In average, customers in
trouble owe between 20,000 and 25,000 kroons.