Capitec announced today that it has taken control of a global online consumer group Avafin.
The Prudential Authority of the SA Reserve Bank has approved a transaction for Capitec to increase its shareholding in Avafin Holding Limited (Avafin), an international online consumer lending group, from 40.66% to 97.69% at a purchase price of €26.3 million.
In March 2017, Capitec acquired an initial 40% interest in Cream Finance Holding Limited (renamed Avafin), domiciled in Cyprus.
The acquisition of a minority interest in Avafin in 2017 provided Capitec with the opportunity to gain experience in the international online consumer credit market, management of operations and risk in foreign markets and international diversification of Capitec’s income sources.
Gerrie Fourie, Chief Executive Officer at Capitec, says that Capitec is continually assessing growth opportunities, both domestically and internationally.
“Acquiring a controlling stake in Avafin is a strategic opportunity to diversify our income sources and build on our experience in foreign markets. Our internationalisation approach is measured and controlled. Rather than acquiring large businesses or pursuing new banking licenses, which can be costly and time-consuming, we have identified Avafin as an ideal partner – a small, agile credit business with exposure to multiple markets, strong credit principles, and a high-potential management team.”
Avafin management will continue to hold the residual interest in the business, in line with Capitec’s philosophy of management ownership.
The transaction is subject to the approval of the Financial Surveillance Department of the SA Reserve Bank and the Polish competition authority.
Key reasons for acquiring the controlling interest in Avafin:
- Strong culture fit – Avafin is a small challenger, taking on large market leaders by focusing on niche solutions for clients through the efficient use of a sophisticated, scalable, technology driven online consumer credit platform and sound credit risk management principles.
- Geographical diversification – The business model developed from a high dependency on a single market to successful operations in multiple markets. Avafin provides online consumer loan products in Poland, Czechia, Latvia, Spain and Mexico.
- Excellent management team – Management and staff are innovative with a pragmatic approach and responsive to changes in the diverse geographical environments in which they operate:
– The business has developed successfully despite multiple challenges including Covid-19, the Ukrainian crisis and regulatory changes in a number of countries where Avafin operates.
– Avafin is agile and management has a proven track record for timely identification and swift implementation of necessary changes to its systems, processes and credit risk appetite.
– The efficiency in adapting and managing change has led to improvements in Avafin’s competitive position and market share after overcoming each of the above challenges.
Avafin is closely aligned to Capitec’s client centric retail business model and well positioned for growth.
Fourie concludes, “By taking a controlling interest in Avafin, Capitec aims to leverage the synergies between the two companies and continue to grow its footprint in the online consumer lending space. We believe this acquisition positions Capitec well for future growth as we continue to deliver on our mission of providing simple, transparent, and affordable banking solutions to our clients.”
