The kremlin Has Driven Small Businesses to Mass Defaults

Small and medium-sized businesses (SMEs) in the rf are rapidly deteriorating. The credit quality of the SME segment is crumbling so quickly that even the banks that managed to lend money to these borrowers are feeling the consequences.

The causes are compounding: profits are falling, borrowing costs remain high, banks are tightening their requirements, debt burdens are rising, counterparties are delaying payments. Together, this creates a domino effect that the kremlin’s economy is no longer able to stop.

As of May 1, 2026, of approximately 600,000 SMEs with outstanding loans, nearly 16.7% were in default. The total volume of non-performing debt reached $8.14 billion and continues to grow.

Microbusinesses are the most vulnerable, but loan quality is already deteriorating among small and medium-sized companies as well – meaning the problem has spread throughout the entire segment.

As of April 1, 2026, variable-rate loans already accounted for 51.1% of the total SME portfolio – twice as much as in 2024. Indexation to the discount rate means that, under the russian central bank’s tight monetary policy, interest payments rise automatically, leaving businesses with increasingly fewer funds for their day-to-day operations.

At the end of March, past-due accounts receivable were 1.3 times higher than a year earlier. Business partners are delaying payments, companies are taking out new loans to stay afloat rather than to grow.

Restructuring does not work: banks approve only about 40% of applications, so most borrowers can neither reduce their payments nor extend their repayment terms, which only brings them closer to default.

In 2026, this deterioration will become an independent risk factor for the entire banking sector of the rf. The growing proportion of distressed borrowers will force banks to build up reserves and cut back on lending, exacerbating the working capital shortage in the business sector. Weak corporate liquidity will worsen banks’ loan portfolios, while financial institutions’ tighter policies will increasingly cut off small businesses from access to capital.