TymeBank is going for Capitec’s gold mine

TymeBank, in partnership with Sanlam, will soon start offering unsecured personal loans, entering the field dominated by Capitec.

Sanlam and TymeBank Limited have entered into an agreement, which will result in establishing a joint venture (JVCo) focused on unsecured personal loans with an embedded credit life offering.

Sanlam Personal Loans (SPL) already provides personal loans of between R5,000 and R300,000 to qualifying individuals on repayment terms of 1 to 6 years at a fixed interest rate, with a loan book value of R5 billion.

Unsecured loans are generally high-risk, high-reward for financial service providers, as they often charge higher interest rates, but come with increased credit risk.

The sector is dominated by Capitec, which started out as a micro-financer in the early 2000s. Several other financial service providers, namely Old Mutual and African Bank, also operate in the space.

The embedded credit life offering built into the loans will also ensure that the debt is covered if a borrower cannot pay due to death or disability.

Sanlam said that the collaboration with TymeBank is an essential component of its overall credit strategy. The two companies have complementary customer bases and skill sets.

It also said that TymeBank has a robust IT infrastructure and bank-grade fraud and anti-money laundering capabilities, which should enhance Jvco’s credit strategy.

Sanlam and TymeBank will jointly develop a new lending capability on TymeBank’s infrastructure. The bank is an expert in developing technological solutions and digital strategies.

The Proposed Credit Transactions will access both Sanlam and TymeBank’s customer bases, enabling cross-selling opportunities.

It added that scale benefits will support a competitive unsecured lending offering under the Sanlam and TymeBank customer-facing brands.

Granted, suspensive conditions and completion deliverables have been completed. The longstop date for implementing the Proposed Credit Transaction is 31 March 2026.

Working together already

Sanlam and TymeBank already have strong connections after Sanlam Life acquired a 25% interest in African Rainbow Capital Financial Services Holdings (ARC FSH), which holds an effective 46% in TymeBank.

ARC FSH is the company that Ubuntu-Botho Investments (UBI) indirectly holds for its financial services. TymeBank is is ultimately controlled by UBI, Sanlam’s strategic empowerment partner.

TymeBank, which launched in 2019 and rapidly expanded to over 11 million customers, reached profitability in late 2023, making it the first digital bank in Africa to do so.

The creation of JVCo will see the existing SPL Loan generation business, excluding its retail credit loan book, sold to JVCo in exchange for the issue of JVCo shares.

TymeBank will acquire the remaining 50% of the JVCo from SPL for R31.5 million.

The price of the SPL loan book shall be roughly R400 million plus the capital value thereof.

TymeBank will receive a preference share, which will target 50% of the credit life profits, as per the terms set out in the subscription agreement.

The subscription price payable by TymeBank to SPL for the Reference Share shall be roughly R320 million.