From fragmentation to consolidation: what happens to the non-banking sector in times of war
In 2025, the Ukrainian market of non-banking financial services will demonstrate structural changes that cover both the very configuration of the sector and the logic of its functioning. Despite the reduction in the number of licensed participants, the total assets, financial liabilities and profitability of the industry are increasing. This is not a paradox, but a consequence of deep concentration: small, undercapitalized companies are gradually disappearing from the market, and their niche is occupied by large financial groups, vertically integrated structures or companies operating under a common brand or with the support of investment holdings.
The market is gradually losing the signs of a fragmented field with a large number of independent players. It is not only a reduction in the quantitative dimension, the changes concern deeper processes. Competition in the field of microcredit, insurance or factoring is no longer determined by price conditions or speed of service. It is not those who offer cheaper that survive, but those who are able to adapt to the regulator’s requirements, accumulate resources and ensure legal and infrastructural stability. For many segments of the non-banking sector, this means not just a transformation, but the completion of a certain stage of development — a transition from a market with a low barrier to entry to a market with a high threshold for survival.
State of affairs in the sphere of non-banking financial services in Ukraine
The first quarter of 2025 demonstrated that the market of non-banking financial services in Ukraine does not follow a single course. While parts of the sector, particularly insurance companies and pawn shops, have shown growth and resilience, other players like credit unions have lost momentum and capital. The general picture developed very variegated, with diametrically opposite trends in different sub-segments and with increased regulator pressure.
During January-March, a record small number of institutions during the period of full-scale war were excluded from the Register – 37 organizations, including 28 financial companies, 6 credit unions, 2 insurers and 1 pawnshop. However, behind the calm statistics there is a strict regulatory selection. Licenses were revoked due to non-compliance with license conditions. We are watching the market being purged of untrustworthy participants. The NBU also limited the activities of 21 companies, allowing them to work only in certain areas. The sector is adapting to new transparency and reporting requirements. In particular, from April 1, financial companies and pawnshops must report on regulatory balances every month, and from July – submit the full amount of reporting. Total assets in the sector grew by a modest 0.2% for the quarter (4.6% year-on-year). The share of non-bank financial institutions in the country’s financial system increased to 10.3%.
Insurance: growth despite pressure and seasonality
In the 1st quarter, the insurance segment once again confirmed its role as the “anchor” of the sector: assets of insurers increased by 8% in risk insurance and 3% in life insurance. However, even here it was not without losses, because two players left the market at once.
Premiums for risk insurance products added 7% for the quarter and 36% for the year. Disbursements rose modestly (+1% qoq), pushing the disbursement rate down to 39%, the lowest level in nearly two years. The main driver was the market for insurance policies: the increase in the cost of policies due to the transition to free pricing resulted in +28% of premiums for the quarter. In life insurance, the situation is the opposite: premiums fell by 16%, payouts by 11%. However, the level of payments remained high and even increased to 28%.
As a result, we have a net profit of risk insurers, which amounted to almost 1 billion UAH, and of life insurers – 0.25 billion UAH. Return on capital increased and the combined efficiency ratio improved to 95%. However, not all were able to stay afloat: three insurers violated solvency standards. Their share in total assets is still only 1%, but the trend is worrying.
Credit unions: minus assets, minus profit, plus reserves
This segment looks less and less viable. Assets of credit unions decreased again, the number of players decreased. The main reason is the exit from the market of unions that worked on additional share contributions. The volume of new loans decreased by 3%, the loan portfolio – by 2%. But there is also a bright side: the share of overdue loans (90+ days) decreased by 4 percentage points, to 27%.
However, operational activity remains unprofitable. Administrative expenses are growing faster than income — +11% y/y against +7% from net interest income. The costs for the formation of reserves are especially pressing. The new IFRS requirements revealed the weakness of approaches to provisioning in most unions. As you can see, the quarter ended with a net loss, and retained earnings decreased by 12%. Deposits decreased by 2%, and repayments decreased by 11%. Assets of financial companies fell by 1.2% due to the shutdown of several large institutions. The decrease in the volume of financial services (-11% for the quarter) was a direct consequence of this dynamic. Lending to households fell for the second quarter in a row, although in annual terms it is still afloat (+7.4%). The credit portfolio of households continues to grow (+22.5% q/q), while new business loans almost halved. The portfolio of corporations grew thanks to longer loans.
Leasing slowed down, having a figure of minus 4.5% for the quarter. At the same time, the volume of leased objects continues to grow. A clear exception is factoring: plus 9.6% for the quarter, 29.2% – in annual terms. Despite the difficulties, most companies remained profitable. 80% of financial companies registered a profit, a significant share of which was formed by the state institution “Ukrfinzhitlo”. Profitability indicators are slightly worse than last year, but not critical. The number of companies violating the requirements for minimum capital decreased by four (from 32 to 7). But the NBU closely monitors the sources of capital growth and manipulations do not pass.
Pawn shops in the war economy
Pawn shops continue to play by their own rules. In the first quarter, the volume of their assets increased by 5.7%, lending – by 2%, the profit remained stable. Even with rising costs, the sector is showing positive profitability. The amount of equity increased by 2.3% during the quarter.
At first glance, the market of pawnshops in Ukraine looks stable. The volume of assets has remained at the level of the last five years, and revenues are growing confidently. But this stability hides a rapid reduction in the number of players, fierce competition for customers, concentration of business in the hands of a few giants, and strict supervision by the National Bank. Those who did not survive were immediately eliminated. Those who remained are trying to consolidate and increase networks, adapting to new realities.
In February 2025, 108 pawnshops were listed in the State Register of Financial Institutions. Of them, 102 had a valid NBU license, that is, they were actually working. For comparison: in 2020, there were 302 such companies. Thus, the sector has almost tripled in five years. However, the total amount of assets practically did not change – UAH 3.98 billion in November 2024 against UAH 3.85 billion in 2020. With fewer companies, the pawnshop sector is trying to generate the same amount of resources as before, just more efficiently.
The lion’s share of the pawnshop business is geographically concentrated in the capital (32) and Dnipropetrovsk region (22). However, it is not only the number of legal entities that is impressive, but also the extent of their networks. Of the 108 companies, 99 have registered branches, and often there are not a few points, but hundreds. The largest number of such branches operate in the Dnipropetrovsk region (500), Kyiv (457), Odesa (306), and Kharkiv (243) regions. The real heavyweights have long gone beyond the normal pawn business. Take, for example, PT Lombard “Pershiy” LLC “Microfinance and Company”, which is part of the “Petrenko Family Group”. This structure owns the “Golden Age” jewelry brand and has 286 branches across the country. The “First” brand covers another company — PT “Lombard No. 1” LLC “Contrakt-Group and Company” with 228 branches. Its beneficiary, Taras Petrenko, is the son of businessman Roman Petrenko. Although the business is a family business, the scale is not domestic at all.
The “Skarbnytsia” brand, which operates 417 branches across the country, is developing no less aggressively. Such concentration is an obvious sign of oligopoly: the ten largest operators actually control the entire market. Financial statistics for 2024 show a paradox: the number of pawnshops is decreasing, but revenues are increasing. 101 pawnbrokers who submitted reports to the NBU declared more than UAH 3 billion in income. For comparison, 136 pawnshops in 2023 received only UAH 2.6 billion for the same period.
In January-September 2024, pawnshops issued more than 1 million loans worth UAH 3.13 billion, while in the same period of 2023 — 4.7 million loans for UAH 10.2 billion. This indicates not so much a decrease in demand, but a transformation of the business model, when a smaller amount of loans means a higher cost of them. Companies squeeze more profit out of each loan by changing their approach to risk assessment and portfolio management.
As we can see, the NBU continues to strengthen its control over the market. Requirements for capital, sources of origin of funds, ownership structure have been increased. A recent update to reporting approaches is another step toward tighter oversight. For pawnshops, this means one thing: small players have little chance left. Only those who can scale, centralize operations, automate business processes and withstand regulatory pressure survive. The way out is shining for everyone else.
The pawnshop sector in Ukraine has long ceased to be associated only with a window where loans are made “against gold”. Today it is a multi-billion dollar business with hundreds of outlets, connected to major retail, the jewelry market and is actually a fragment of financial and industrial groups. And although the number of participants has decreased, a new quality is emerging right now, in this concentration. This is no longer a small financial service, but a serious instrument of public lending with its own risks, its own profitability and its own rules of the game.
The increase in the income of pawnshops in Ukraine during the full-scale war is an economic and social marker that indicates not only the adaptation of the financial sector to the conditions of instability, but also the aggravation of solvency problems among the population. In peacetime, pawnshops perform the function of short-term collateral lending, providing a financial “cushion” for households in situations of unforeseen expenses. But during a protracted war, they become an indicator of the systemic need of Ukrainians for immediate access to money, when traditional sources have been exhausted.
After the full-scale invasion began in February 2022, many Ukrainians lost their sources of stable income. According to official estimates, the unemployment rate in the first year of the war reached 30%. At the same time, there was a reduction in the lending activity of banks, especially in the field of unsecured consumer lending. Banking institutions focused on minimizing risks and reorienting their resources to support defense capabilities and big business. As a result, millions of Ukrainian families found themselves in a financial void — without access to the usual loan tools, without savings and with a constant need for cash.
In these conditions, pawnshops have become almost the only link in the financial system capable of providing quick credit in cash without lengthy credit history checks, without bank accounts and without formal employment. The essence of pawnshop activity is to provide a small loan against the collateral of things: gold, equipment, tools, sometimes even clothes. For a person who needs funds today, this may be the only real possibility of survival.
According to the data of the National Bank of Ukraine, already in 2023, the volume of new contracts with pawnbrokers exceeded pre-war indicators. At the same time, the average amount of loans increased, which indicates not only an increase in the number of customers, but also a deeper penetration of pawnshops into the fabric of everyday life. In many cities, these institutions have turned into a permanent source of working capital for small entrepreneurs, immigrants, the unemployed and pensioners. Many people began to perceive pawnshops not as a one-time tool, but as a regular way of maintaining personal liquidity.
The factor that additionally stimulates the demand for the services of pawnshops is the peculiarities of the internal movement of the population. Millions of people who left their homes in occupied or front-line territories often did not have access to bank accounts, could not quickly verify their ability to pay or employment. For them, turning to a pawnshop with personal belongings became the easiest way to get the required amount. In such cases, these institutions play the role of an informal bank in a crisis economy.
The psychological aspect also plays a certain role in the growth of pawnbrokers’ income. In unstable times, people are more willing to part with valuables if it allows them to cover urgent expenses. The value of gold as a collateral is increasing against the background of global turbulence, which makes it attractive as an asset even for pawnbrokers themselves. In parallel with this, the trust in long-term financial instruments is decreasing – in the conditions of military unpredictability, people need to solve the problem “today”, and not invest in “tomorrow”.
Another important factor is the liberalization of the digital services of pawnshops. In 2023-2024, the number of online mortgage transactions almost doubled. Some major chains have offered mobile apps for contract renewals, money transfers and even video customer identification. This greatly expanded their audience, reduced barriers to cooperation and turned pawnshops into almost full-fledged players in the microfinance market.
However, the increase in the profitability of pawnshops is not a sign of stability or prosperity. On the contrary, it is a symptom — a marker that the level of financial vulnerability of the population is increasing, and traditional institutions do not provide sufficient support. When more and more people pawn the latest equipment, jewelry or family heirlooms for a few thousand hryvnias, this is not a market success, but a mirror of the crisis, which demonstrates the fallacy and inequality of resource distribution during the war.
Thus, pawnshops in Ukraine perform the function of emergency adaptation of society to economic destabilization. They meet the demand for cash where banks do not take risks, and close the need for resources where the state does not have time. But it is also evidence of deep social tension. The growth of pawn shop profits is not an economic achievement, but a by-product of survival. In this formula, temporary liquidity is obtained at the cost of a long-term constraint. And while this dynamic continues, society risks leaving not only gold or a smartphone as collateral, but also trust in institutions that should be the first in trouble.
Consequently, the sector of non-banking financial services in Ukraine is rapidly losing the features of a free market and turning into the territory of a controlled game with a high entry threshold. All those who remain play big: scale, automation, vertical integration, deep adaptation to the regulator’s requirements. Small players have either already disappeared or are counting the days until they leave. The market no longer tolerates weakness, it filters it. And although the growth figures look moderate, the main process is not in the indicators, but in the structure: new centers of power are being formed, the balance sheet is being rewritten, and all this is happening under the strict supervision of the NBU. Such changes no longer look like ordinary market fluctuations, it is a deep restructuring with new rules of the game.
