Capitec acquires controlling Avafin shares

South Africa, 12 March 2024: Capitec, South Africa’s leading digital bank, is pleased to announce its proposed acquisition of a controlling interest in Avafin Holding Limited, an international online consumer lending group, subject to approval by the Polish competition authority. The South African Reserve Bank has approved the transaction, allowing Capitec to increase its shareholding in Avafin from 40.66% to 97.69% for a purchase price of €26.3 million (approximately R540 million).

Background on the acquisition

The initial acquisition of a 40% interest in Avafin, previously known as Cream Finance Holding Limited, occurred in 2017. This strategic move provided Capitec with valuable experience and learnings in the international online consumer credit market, including insights into managing operations and risks in foreign markets and diversifying income sources internationally.

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.”

Capitec's growth and internationalisation strategy

Capitec says it’s exploring options such as expanding its product range in the existing market and introducing its existing product range to new markets like Avafin to continue its growth trajectory.

Capitec has outlined several key reasons for acquiring the controlling interest in Avafin:

• Strong culture fit: Avafin's approach as a small challenger in the market aligns with Capitec's focus on niche solutions and efficient use of technology.
• Geographical diversification: Avafin has expanded its operations from one market to multiple markets, offering online consumer loan products in Poland, Czechia, Latvia, Spain, and Mexico.
• Excellent management team: The management team at Avafin has demonstrated innovation, agility, and responsiveness to changes in various geographical environments. They have successfully navigated challenges such as the COVID-19 pandemic, the Ukrainian crisis, and regulatory changes in their operating countries.

Despite the bank’s proposed acquisition of a controlling interest in Avafin, the international online consumer lending group’s management will retain the residual interest in the business, aligning with Capitec's philosophy of management ownership.

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."