Capitec spreads its loan wings

OVERSEAS SAFARI: FIRST CROSS-BORDER FORAY FOR NEWCOMER South Africa’s low-income bank, Capitec, is expanding with its first overseas purchase.

Capitec is to acquire a stake in a European online lending group, marking the first entry into international markets for the local bank focused on the lower-income market.

The group is to purchase a 40% stake in digital finance company Creamfinance for €21 million.

Wide spread

Creamfinance, founded in Latvia in 2012, offers consumer loan products in countries such as Latvia, Poland, Georgia, the Czech Republic, Mexico and Denmark.

Capitec said it sees synergies between its own long-term digital strategy and that of Creamfinance’s business model, technology and credit scoring methods.

“It is an appropriate match. Creamfinance’s online business model has been developed in such a way that new countries can be entered swiftly and efficiently, requiring limited investment in local infrastructure.

“Capitec’s focus will be to provide strategic input and give access to skills in key areas such as information technology, credit management and the development of term loan products, thereby assisting Creamfinance to further grow its international business,” said Gerrie Fourie, chief executive of Capitec.

He added that the group’s foray into the high-growth consumer fintech industry, through Creamfinance, has the potential to offer sustainable growth and capital generation.

While Capitec aims to gain experience in entering and operating in foreign countries, especially with respect to advancing credit in international and online environments, it will not be involved in the day-to-day running of Creamfinance.

Instead, it will provide “strategic input and give key access to skills in key areas such as information technology, credit management and the development of term loan products,” it said.

Existing shareholders will be given the option to sell 9% of the shareholding in Creamfinance to Capitec at a cost of not more than €5.4 million, effectively increasing Capitec’s stake to 49%.

According to Capitec, the South African Reserve Bank has approved an investment of up to 49% in Creamfinance.