Wonga eyes small enterprises

DIGITAL short-term loan provider Wonga.com said yesterday it was investigating the possibility of lending to small and medium-sized enterprises in SA as part of its growth plans.

INTERNET-based short-term loan provider Wonga.com said yesterday it was investigating lending to small and medium-sized enterprises (SME) in SA as part of its growth plans. Wonga, which has been operating in SA for over a year and was founded in London by two South Africans, lends to meet the cash-flow needs of customers.

“It (SME lending) is under consideration,” Wonga Finance SA CEO Kevin Hurwitz said yesterday. “We are looking at it for next year.”

He said the idea was to meet the needs of small businesses expecting to get cash later.

Wonga has been advertising aggressively in the local media, raising questions about its growth.

For competition reasons, Mr Hurwitz was reluctant to give the size of the company’s loan book and how much it had grown since its launch last year.

He said only that on average Wonga advanced tens of thousands of loans per month.

“Our average loan for first-time customers is about R1,600 and for returning customers it’s about R1,900,” Mr Hurwitz said.

The company’s maximum loan size was R2,500 for first-time borrowers. Returning consumers had borrowed for a maximum amount of R3,800 until now, although the company could lend up to R8,000.

Customers had up to a month to repay but the company was looking at a lending product that allowed customers to repay their loans over three months.

But Mr Hurwitz said the company was not looking at increasing the loan sizes.

For a loan of R2,500 payable over a month, a borrower will pay back R3,027 in total. Interest and fees will cost R527, according to the company’s website.

Mr Hurwitz said the company was declining 75% of loan applications and customer arrears were in the single digits.

To assess risk, the company used a credit bureau and crunched thousands of pieces of data to assess the risk.

“There is a trust algorithm that changes the amount returning customers can borrow,” Mr Hurwitz said.

Wonga collects through debit orders and uses debt collectors for customers in arrears.

Mr Hurwitz said the company was self-funded to meet borrowing needs and had also sold a small stake to raise funds for loans.

The company is owned by venture capitalists.

Wonga operates in SA, UK, Spain, Canada and Poland.

The Telegraph in the UK reported last month that the lender had made an acquisition in India. Further, it reported that Wonga’s pretax profits rose.

The Telegraph said Wonga had lent £1.16bn in the UK last year.