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What is the state of the consumer lending market in Estonia?

As of 2020, the size of the consumer credit market in Estonia is around €0.9 bn. The leading product in consumer financing is consumer loans, accounting for over 75% of the total, whereas credit cards and overdrafts have significantly smaller share. The sector has been dominated by banks, but several other providers started to emerge since mid -2000s. Currently the credit institutions still maintain the dominant position with banks and their subsidiaries controlling over 80% of the total market. 

The market leaders in consumer financing among banks are Swedbank and SEB. Major change in the credit market has been brought by emergence of marketplace platforms targeting several segments of the financial products with Bondora being the leader in consumer lending. The other largest non-bank consumer lenders are Telia Eesti, Coop Finance, Koduliising, IPF Digital Estonia and Creditstar Estonia. The importance of these alternative providers is gradually increasing, particularly in the segment of unsecured consumer lending.

Historic development of the consumer loan market can be tracked by statistics of the banking market, as reliable information on non-bank lenders became available only in 2016. Accordingly, in line with overall economic development the balance of consumer loans started to increase rapidly in the period of 2004 – 2008, growing from €134m to €856m. Thereafter, the market declined significantly in line with contraction of GDP and private consumption. The market reached the bottom of €591 million in 2013 and started to grow again in the following years.

The APR level in Estonia is regulated and capped at three times the average interest rate of unsecured consumer loans, published semi-annually by the Bank of Estonia. Main regulatory change was introduced in 2015 with adoption of Creditors and Credit Intermediaries Act that introduced stringent regulatory requirements for all non-bank companies on the credit market starting from April 1 2016. Accordingly, all credit providers and intermediaries have to be licensed and they are supervised by the Estonian Financial Supervision Authority.