Thursday, December 1 2022

Moroccan e-commerce and B2B retail start-up Chari has acquired Axa Credit, the credit arm of Axa Assurance Maroc, for $22 million, the company confirmed to TechCrunch today.

The news follows Chari’s recently closed seed extension round which valued it at $100 million and began offering BNPL services to its clients.. It is one of the few African startups to publicly disclose its valuation.

Chari digitizes the largely fragmented FMCG sector in parts of Francophone Africa, particularly Morocco and Tunisia. It operates a mobile application that connects small retailers in these two countries with multinational FMCGs and local manufacturers, allowing them to order and obtain products in less than 24 hours..

Last October, the YC-backed company acquired Moroccan credit book The Khatabook-esque platform provides credit and accounting services to around 50,000 merchants. It allows these merchants to manage the credit they extend to their customers.

The acquisition of Axa Credit — the Moroccan credit branch of the French group Axa — makes Chari one of the few, if not the only, startup to to acquire a local branch of a global bank. The acquisition is still subject to approval by Moroccan banking, insurance and competition authorities, Chari said in a statement..

CEO Ismael Belkhayat told TechCrunch that Axa was withdrawing its credit business—secondary to its main insurance activity –of Morocco and saw Chari fit to take over.

“They decided to give the case to Chari because I think they believe that we are the ones who are able to do financial inclusion,” said the managing director who founded Chari with his wife and COO, Sophia Alj.

In Morocco, 70% of the population is either unbanked, under-banked or unable to prove recurring income. For them, access to a loan can be difficult because the lenders need them to show some financial stability to repay, which is almost impossible because they do not have a bank account..

Chari thinks she can help this segment of the population, but how does she plan to lend to these end consumers and get their money back if they don’t have a credit history or database to determine their creditworthiness? The solution lies in acquiring Karny, Belkhayat said.

Typically, traders and shop owners in Morocco provide small loans to their customers. Karny acts as this tool that these traders use to record the movement of money in and out of their business. So buying Karny gives Chari valuable data on the loans these traders take out to their customers.

The acquisition of Axa Credit will provide Chari with the necessary credit license to begin offering loans to its FMCG B2B customers (which it currently does), who can then lend money to their consumer customers.. You can think of it as a B2B2C lending model.

Chari believes that merchants know their customers’ spending habits, where they live, when and how they get paid, and are so able to perform credit risk assessment that a regular bank is unable to do.

“For example, we have 40 million people and about 200,000 stores, which means that each store has an average of 200 customers in total. And indeed, the average family size in Morocco is five people. So , each store has an average of 40 families as customers,” the CEO said of how Chari turns store owners into loan officers.

“Each store knows each family, where they live, an idea of ​​how much they earn, when they get paid; if it’s every week, it’s every month, what they consume and buy. Thus, store owners can do credit or credit risk assessments to define how much they can lend to their customers. »

Besides to the granting of loans, shop owners and merchants can provide consumer products on credit. By offering loans and goods on credit to merchants who act as branches and, in turn, provide the same services to end consumers, Chari says the underbanked now have the opportunity to play on equal footing with those who have bank accounts.

Chari offers a free line of credit to its merchants; the cost of loans are loaded to FMCG suppliers in the form of a higher distribution margin. In exchange, vendors get data on the SKUs they sell to each store. Store owners who intend to offer loans to their end consumers get higher credit lines from Chari, who sshares data collected by Karny (on end-consumer buying behavior) with FMCG companies that pay higher loan costs.

In the future, when he amass more users, Chari plans to charge merchants setup fees and low interest rates.

This transaction is noteworthy for several reasons. First, bragging about being a transparent startup with numbers its peers would otherwise be unwilling to share. Although we can Argue that it is not a purely tech deal (startup buying another startup), it does not change the fact that Chari has made known the acquisition figure of this deal (and in the past, its valuation) , which is rare in the African startup scene.

Secondly, this operation allows Axa Insurance Morocco to refocus on its core business: insurance, which seems to align with the global strategy of the Axa group, where similar restructurings have taken place in its developing markets..

“We are delighted to announce a cross-selling partnership between Axa Insurance Morocco and Chari. This partnership will allow Axa Insurance to continue its growth in the Moroccan market and play a central role in financial inclusion,” said Meryem Chami, CEO of Axa Maroc, in a press release..

But how did Chari manage to fund this deal when he’s only raised $7 million so far? Belkhayat said the company’s acquisition money includes part of its seed funding, a leveraged buyout (local debt from banks) and negative working capital from its deal with large product makers. consumption (about $5 million).. The company is also preparing to raise a big Series A round.


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