Author: Nayantara Jha
Johannesburg based Lebashe group announced that it would increase its stake in the Peer-to-Peer lending startup RainFin, this Friday. It will expand its current holding by 24% to make it a significant chunk of the stake at 75% for an undisclosed sum. The ambition reportedly is fuelled by the company’s vision of building a black-owned bank.
RainFin that operates as a credit marketplace has been giving access to alternate credit to its customers. Since its inception in 2012, the startup has focussed on borrowers who face traditional costs and barriers in accessing credit through formal methods. The company makes the investor and borrower meet at a common interface, providing a platform for them to transact. Upon reaching the interests of both the parties, access to fund is allowed.
The company added crowdfunding and business- to-retail loans in its portfolio in 2016, by giving it a chance to add USD 8 Mn to its portfolio. It bought back the 49% stake held by Barclays’ South African unit, two years ago and almost bootstrapped out of that period. Last year, it concluded a 30% equity transaction with The LeBashe Investment group for an undisclosed amount.
Sean Emery, RainFin CEO said: “As part of the initial Lebashe investment, we have successfully piloted an R40 Mn SME fund, in our SME Credit marketplace Division, called Texmex and have identified opportunities to scale this fund with additional capital for various target segments of SMEs. In order to attract more capital into our SME funds, we need to increase our balance sheet to be at least 20% of the size of the funds we want to build.”
The company created two divisions with a focus on corporate debt structures and SME credit marketplace. Recently, the FinTech startup acquired a stake in Johannesburg based 4AX in exchange for the sale of its corporate debt marketplace. They had mentioned that South Africa followed the global trend, where corporates were gaining access to online debt platforms, a market that saw 264% Y-O-Y growth between 2015-16.
Both Lebashe Group and RainFin have a firm belief in black ownership of financial institutions to bring about positive change for the population not served through traditional networks. The investment in the FinTech solution company gives direct access to LeBashe Group, to the unbanked population with credit requirement.
“We are targeting to build an R1bn SME fund and as such, we need to have in excess of R200m capitalization on our own balance sheet– this transaction assists us in our path to achieving this. In addition, this transaction enhances RainFin’s capabilities for expansion and will allow us to accelerate our growth strategy, added Emery.
The current deal reportedly follows a series of transactions already concluded by Lebashe. This includes the purchase of 5.3% of Capitec Bank Holdings Ltd. and a USD 257 Mn deal with technology group EOH Holdings Ltd. Companies have been selling to black investors as part of South Africa’s drive to reverse years of discrimination caused by white-minority rule, which ended in 1994. It also bought TSS Capital, an investment and corporate advisory boutique.