Small business and consumer finance companies are struggling to maintain growth in the face of higher funding costs, rising arrears and weaker demand.
Small business lender Prospa Group is the second lender in a week to report a significant fall in originations in the June quarter. Originations of A$155 million during the quarter were down 37 per cent on the previous corresponding period.
Prospa increased its expected credit loss provisions to 12.7 per cent of closing gross loans (up from 9.4 per cent in the December half-year) and tightened credit risk settings.
This followed Wisr reporting that its originations of $53 million in the June quarter were down 71 per cent on originations in the same period last year and were less than half originations of $140 million in the March quarter.
Credit bureau Equifax reported that applications for unsecured consumer credit fell 8.3 per cent in the June quarter, compared with the same period last year. Personal loan applications were down 5.9 per cent and buy now pay later applications were down 26.3 per cent.
Equifax also reported that personal loan arrears rose 12 per cent in the June quarter and credit card arrears rose 11 per cent.
Prospa chief executive Greg Moshal said in a statement: “Our portfolio yield remains steady. However, losses were higher as certain small businesses experienced heightened cost pressures, changes in consumer demand and weakening revenue.”