Axa Credit, the credit branch of Axa Assurance Maroc, has been acquired for $22 million, according to the company.
The news comes off the back of the recent closed seed extension round that saw the company valued at $100 million and begin offering its services to its customers. It's one of the few African startups to publicly reveal its valuation.
In parts of French-speaking Africa, such as Tunisia and Morocco, there is a largely fragmented FMCG sector. It operates a mobile app that connects small retailers in these two countries to multinational and local manufacturers, allowing them to order and get products in less than 24 hours.
The company acquired a credit book in October. About 50,000 merchants are served by the platform. Merchants can handle the credit they give to their customers.
The acquisition of the Axa Credit branch of the French-based Axa Group makes Chari one of the few, if not the only, startup to acquire a local branch of a global bank. The acquisition is still subject to approval from the banking, insurance and antitrust authorities.
Axa was pulling out its credit business and moving its insurance business from Morocco to Chari, according to the CEO.
The chief executive who founded Chari with his wife and COO said that they decided to give the deal to them because they believe they are able to do financial inclusion.
70% of the population in Morocco are unbanked, underbanked or unable to prove recurring income. It can be difficult for them to get a loan because they don't have a bank account.
How does it intend to lend to these end consumers and get reimbursed if they have no credit history or database to determine their creditworthiness? The solution is the acquisition of Karny.
Merchants and shop owners give small loans to their customers. Merchants use kerny to record money movement in and out of their business. Buying Karny gives the merchant valuable data on the loans they give to their customers.
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The acquisition of Axa Credit will allow the company to start offering loans to its B2B clients, who can then lend money to their consumer clients. You can think of it as a B2B2C lending model.
The credit risk assessment that a regular bank is unable to do is due to the fact that shop owners know the consumption habits of their clients, where they live, and when and how they get paid.
We have 40 million people and 200,000 shops, so each shop has an average of 200 customers. An average family size in Morocco is five people. According to the CEO, each shop has about 40 families as clients on average.
Each shop knows how much a family makes when they get paid and what they eat and buy. The shop owners can do credit assessments to figure out how much they can lend to their clients.
Shop owners and merchants can also provide credit on credit. The underbanked now have the opportunity to play on a level field with those who have bank accounts by offering loans and goods on credit to merchants who act as branches.
The cost of the loans are charged to the suppliers in the form of a higher distribution margin. Suppliers get data about the categories they sell to each store. Shop owners who intend to offer loans to their end consumers get higher credit lines from Chari, which is used by companies that pay for the cost of the higher loans.
When more users are added, the company will charge merchants a setup fee and low-interest rates.
This transaction is noteworthy for a number of reasons. If a startup were transparent with numbers its peers wouldn't be willing to share them. Although one can argue that this isn't a pure tech deal, it doesn't change the fact that Chari made known the acquisition figure of this deal, which is rare in Africa.
This transaction allows Axa Insurance Morocco to focus on its core business of insurance, which seems to be in line with the global strategy of Axa Group, where similar restructurings have taken place in its developing markets.
We are excited to announce a partnership between Axa Insurance Morocco and Chari. Meryem Chami, the general manager of Axa Morocco, said in a statement that this partnership will allow Axa Insurance to keep growing on the market and play a central role in financial inclusion.
How has Chari been able to finance this deal despite only raising $7 million so far? The company's acquisition money consists of seed financing, a leveraged buyout, local debt from banks, and negative working capital from its transaction with manufacturers. The company is going to raise a large round.
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