Nov 14, 2016 BLOG Evolving
Today is an exciting day in the life of RainFin, we hereby confirm that RainFin’s founders and management are buying back Absa’s 49% shareholding in RainFin.
This will allow RainFin, under the control of its founding shareholders, to focus on building strategic partnerships with multiple financial institutions and wholesale capital providers, which is aligned to our growth strategy.
Acknowledging our journey thus far:
We want to thank Absa. As a core shareholder in RainFin during our foundation years, Absa have added significant value to our business and the foundations upon which it is built. Their contribution and scrutiny in terms of our regulatory, compliance, legal and operational governance has put us in a very strong position to grow way beyond the initial personal loan (peer-2-peer) space. RainFin is now in a position to offer a full credit marketplace to all sizes of business, from SMEs to mid-size corporates and even to municipalities and state owned entities. Although at times it was frustrating to have such a large bank as a shareholder, having our business operations exposed to the rigors of complying with all the bank’s standards in terms our activities to facilitate lending activities on their behalf, has been a major part of our successful development as South Africa’s only Credit Marketplace with both FSB and NCR accreditation.
What does this mean for us going forward:
RainFin will continue to use its technology and platforms to democratise lending, thereby allowing all South Africans to participate in these markets, giving all our customers cheaper access to loans and savings products.
The purchase of the Absa shares better positions us to engage and work with multiple financial institutions or wholesale capital providers. We are also expanding our service offering to incorporate a corporate and SME credit marketplace with secured and unsecured loans. This means that we will no longer limit loan applications to R750k; we will service the borrowing needs of any size business, as long as they meet the new increased standards of our version 3 credit scoring methodology.
This is great news because, for the first time, any business, irrespective of size, can connect directly to both institutional and retail lenders i.e. RainFin’s lender base.
In preparing to move forward, we have revised our Credit Scoring (something which we constantly do to enhance our scoring capabilities) moving away from scorecards implemented to serve the needs of previous committed funders. We have established agreements with independent credit assessment agencies and providers and will transition to scorecards that are internationally recognised. The revised scoring will provide both borrowers and lenders with enhanced value. Further to this, version 3 of our SME scorecard has evolved to include the following elements:
- Moody’s KMV Risk Calc South Africa
- Transunion Credit Assessment
- RainFin Financial Affordability Assessment
Our primary reason for moving in this direction is to better position RainFin to capitalise on the rapid move into lending by wholesale capital providers. More and more, asset managers and pension funds are becoming comfortable with direct exposure to debt, with a view to build their own pool of interest-income assets, as opposed to participating in a bank’s debt offerings. We are confident that this trend will contribute to an exponential growth of credit marketplaces. Aligned to this, we are presently in discussions with a number of potential partners. Beyond working to conclude negotiations to secure lending mandates, we envisage that we will replace Absa’s equity position with other, more aligned, shareholders in the not too distant future.
You may be wondering about our way forward in regard to consumer lending: here too we are in the process of concluding a number of agreements, and expect that we will soon be publishing consumer loans of very high quality.
Over the past year we have been preparing for the recent changes to the NCR, with our previous shareholder, and were due to launch RainFin’s new structure before the compliance deadline. Sadly, we were unable to launch this structure before the 11th of November deadline because of delays linked to the Absa share sale. We will, however, be launching our new NCR compliant structure during the next few weeks.
The past few months have been an exciting journey for the core RainFin team and we’ve also welcomed a few new people to our team, to fill those strategic positions we’ve identified as critical to achieve our growth ambitions and we are all looking forward to the journey ahead.
These changes will soon translate into a range of loans being published onto our platform. Not only does this increase the potential for our lenders to earn competitive returns, it also gives them the opportunity to contribute toward our broader purpose and the reason for starting RainFin i.e. to better service the growth capital needs of South African businesses. We believe this will contribute to economic growth and wealth creation.
Thank you for remaining committed to the movement and disruption of traditional market participants, no one ever expected it to be easy!