Are SMEs the way for Wonga?
Online micro-lender Wonga.com says it’s seen strong growth in South Africa over the past year, and is considering extending its lending service to SMEs, though no solid plans are in place.
Wonga launched in South Africa in May 2012, and received a warm reception in the country, despite echoes of controversy emitting from the UK.
The online and mobile lending platform offers small, short-term loans starting at R2,000 for first-time clients and up to R8,000 for long-time users who have built up a strong trust profile with the company.
According to Wonga, the company has seen strong growth and increased activity on its platform in South Africa over the past year.
“It’s still early days, but we have seen some strong growth since we launched in May last year,” a spokesperson told BusinessTech.
“We are now granting tens of thousands of loans each month, and we are happy with where we are in terms of our business life cycle.”
In the UK, the online micro-lender launched an SME-lending platform, called Wonga for Business, as a result of a shift in lending practices by big banks – that is, most have stopped lending money to small businesses, it said.
“We suspect there may be a similar need here (in South Africa). Many small businesses really struggle with cash flow – very often they are unable to pay in advance for stock or to buy supplies that are vital to their operation, simply because customers are slow to pay,” The company told BusinessTech.
Wonga says its priority in South Africa is to continue to grow its business in the country, and to extend its reach in new territories.
“[Wonga for Business] is one of many products we are considering launching in SA, however there are no fixed plans or timetable to launch this here,” it said.
Kevin Hurwitz
State of affairs in SA
Wonga has previously attracted criticism in the UK for targeting low-income customers who often end up over-reaching their borrowing and subsequently accrue huge charges with high interest rates.
Similar concerns have been raised in the South African micro-lending market over the past year, particularly targeted at micro-lending banks, such as Capitec.
However, Wonga CEO Kevin Hurwitz told BusinessTech at launch that the company takes responsible lending into serious consideration.
“Part of that is a commitment to financial education. There are several places on our website where we discuss protecting one’s personal details, advice on managing debt, understanding financial jargon and similar issues,” he said.
According to the lender, “the average loan term is 25 days. We still only approve about 25% of new applicants which helps to keep our default rate in the single digits,” the company said.
According to the company’s data, the average loan amount for new customers is R1,565, while returning customers borrow an average of R1,959.
In November 2012, Wonga launched its lending platform on mobile devices – for both smartphones and feature phones. According to data from the company, in a customer survey conducted in June 2013, of 12,000 respondents, every single one was a mobile phone owner.
“Both our mobi site and site for feature phones are increasingly popular. For many in SA this is the only way to connect to the Internet, so we are aware that mobile will continue to be an important platform for us,” Wonga said.
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