In a move to boost the availability of affordable consumer credit services in South Africa, financial services group Real People has signed a EUR5 million (R46.7 million) convertible loan agreement with the French development finance institution Proparco.
This transaction follows the recent 7% investment in Real People by global private equity fund Aureos Capital.
Proparco joins the ranks of a number of development finance institutions, government finance agencies and international banks in backing the Eastern Cape-headquartered Real People's mission to extend responsible, efficient credit products to ordinary South Africans.
The purpose of the term credit facility extended by Proparco to Real People is to foster the development of Real People in South Africa. The facility will be used, within the auspices of the new National Credit Act (NCA), to expand Real People's various lines of consumer finance products, including education products, housing and personal loans.
"The overall objective behind this transaction is to lower the cost of credit for the South African emerging population, by sourcing the appropriate term financial resources allowing Real People to expand the maturity of its product offering, and consequently to lower the effective cost of such facilities for the final beneficiaries," says Proparco's CEO Luc Rigouzzo.
Adds Proparco's Regional Representative for Southern Africa, Laurent Klein: "Proparco aims as well, in supporting an innovative group, at further broadening the range of financial services and insurance products offered to the low to middle income market in South Africa."
"This agreement with Proparco represents another milestone in the ongoing development of Real People's business model. Our enterprise is based on the provision of innovative and competitive credit products for emerging markets, through a combination of operational efficiencies and efficient capital structures," comments Real People's MD, Johan van Rooyen.
Real People's Strategy Director Neil Grobbelaar says: "The transaction with Proparco is further evidence of the increasing appetite among both domestic and foreign funding providers to invest in the growth of the provision of appropriate credit-based offerings to our market.
"The agreement struck between Real People and Proparco is further evidence of the faith of these players in the ability of Real People to manage credit in this market. Significant to us too is the responsible provision of credit is being recognised as an essential to uplifting living standards to assist in the provision of education and housing in South Africa."
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Established in 2001, East London-based Real People, with over 120 branches and more than 1 600 employees, operates nationally in South Africa, as well as in Africa, Swaziland, Tanzania, Kenya, Lesotho and Botswana.
Real People was recognised as one of South Africa's Top 300 companies in 2004, 2005 and 2006. The group also won the Micro Finance Regulatory Council (MFRC)/BANKSETA national lender competition for the most innovative system in low-income housing lending.
Real People offers consumers an extensive range of personal financial services and assurance products tailored to meet individual and groups' needs.
Proparco
Proparco is a subsidiary of the French Development Agency (AFD) and a member of the European Development Finance Institutions (EDFI). Proparco aims at financing the private sector in developing and emerging countries. Private sector, as the main source of growth and job creation, is a direct contributor to the achievement of the millennium development goals.
Proparco's public and private shareholding, along with its bilateral and financial partnerships, enable the company to offer innovating solutions to the challenges of long-term investments in developing and emerging countries.
Proparco invests in equity (EUR0.5 million to EUR20 million per transaction), lends on a medium to long-term (EUR2 million to 100 million per transaction), provides guarantees (EUR2 million to 100 million per transaction), and offers access to AFD's products and project support facilities. Proparco committed EUR412 million in 2006 and has a balance sheet of EUR1 billion.
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