Moroccan B2B e-commerce and retail startup Chari has acquired Axa Credit, the credit branch of Axa Assurance Maroc, for $22 million, the company confirmed to TechCrunch today.
The news comes off the back of Chari’s recently closed seed extension round that saw it valued at $100 million and begin offering BNPL services to its customers. It is one of the few African startups to publicly disclose its valuation.
Chari digitizes the largely fragmented FMCG sector in parts of French-speaking Africa, particularly Morocco and Tunisia. It operates a mobile app that connects small retailers in these two countries to FMCG multinationals and local manufacturers, allowing them to order and get products in less than 24 hours.
Last October, the YC-backed company acquired Moroccan credit book Karny.ma. The Khatabook-esque platform provides credit and bookkeeping services to about 50,000 merchants. It allows these merchants to handle the credit they give to their customers.
The acquisition of Axa Credit — the Moroccan credit branch of the French-based Axa Group — makes Chari one of the few, if not the only, startups to acquire a local branch of a global bank. The acquisition is still subject to approval from the Moroccan banking, insurance and antitrust authorities, Chari said in a statement.
CEO Ismael Belkhayat told TechCrunch that Axa was pulling out its credit business—secondary to its core insurance business—from Morocco and saw Chari fit to take over.
“They decided to give the deal to Chari because I think they believe we are the ones able to do financial inclusion,” said the chief executive who founded Chari with his wife and COO, Sophia Alj.
In Morocco, 70% of the population are either unbanked, underbanked or unable to prove recurring income. For them, accessing a loan can be difficult as lenders need them to show some financial stability to repay, which is near impossible because they have no bank accounts.
Chari thinks it can help this segment of the population, but how does it intend to lend to these end consumers and get reimbursed if they have no credit history or database to determine their creditworthiness? The solution lies in the acquisition of Karny, said Belkhayat.
Typically, merchants and shop owners in Morocco give small loans to their customers. Karny acts as that tool these merchants use to record money movement in and out of their business. Therefore buying Karny gives Chari valuable data on the loans these merchants underwrite to their customers.
The acquisition of Axa Credit will offer Chari the credit license needed to start offering loans to its FMCG B2B clients (which it currently does), who can then lend money to their consumer clients. You can think of it as a B2B2C lending model.
Chari acknowledges that shop owners know the consumption habit of their customers, where they live, and when and how they get paid, and are therefore able to perform the credit risk assessment that a regular bank is unable to do.
“For instance, we have 40 million people and about 200,000 shops, which means that each shop has in total, an average of like 200 customers. And effect an average family size in Morocco is like five people. So each shop has like 40 families as clients on average,” said the CEO explaining how Chari is turning shop owners to lending agents.
“Each shop knows each family, where they live, an idea of how much they earn, when they get paid; if it’s every week, is every month, what they consume and buy. So the shop owners can do credit assessments, or credit risk to define how much they can be lending to their clients.”
More to providing loans, shop owners and merchants can provide FMCG 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 a level field with those who have bank accounts.
Chari offers a free credit line to its merchants; the cost of the loans are charged to the FMCG suppliers in the form of a higher distribution margin. In exchange, suppliers get data about the SKUs they sell to each store. Shop owners who intend to offer loans to their end consumers get higher credit lines from Chari, which shares the data collated from Karny (on end consumers’ purchasing behaviour) with FMCG companies that pay for the cost of the higher loans.
In the future, when it amasses more users, Chari plans to charge merchants a setup fee and low-interest rates.
This transaction is noteworthy for several reasons. First, bragging rights as a startup transparent with numbers its peers would otherwise not be willing to share. Although one can argue that this isn’t a pure tech deal (startup buying another startup), it doesn’t change the fact that Chari made known the acquisition figure of this deal (and in the past, its valuation), which is rare in Africa’s startup scene.
Second, this transaction allows Axa Insurance Morocco to refocus on its core business: insurance, which seems to be in alignment with the global strategy of Axa Group, where similar restructurings have taken place in its developing markets.
“We are thrilled to announce a cross-selling partnership between Axa Insurance Morocco and Chari. This partnership will allow Axa Insurance to keep growing on the Moroccan market and play a central role in financial inclusion,” said Meryem Chami, the general manager of Axa Morocco, in a statement.
But how has Chari managed to finance this deal despite only raising $7 million so far? Belkhayat said the company’s acquisition money includes some portion of its seed financing, a leveraged buyout (local debt from banks) and negative working capital from its transaction with FMCG manufacturers (about $5 million). The company is also gearing up to raise a large Series A round.