Moroccan B2B e-commerce and retail platform, Chari acquires Axa Credit, the credit branch of Axa Assurance Maroc in a recent deal worth $22 million.
The announcement follows Chari’s recently completed seed extension round, in which company became valued at $100 million and began providing BNPL services to its customers. It is one of the few African start-ups that has made its valuation public.
Chari digitises the highly decentralized FMCG sector in French-speaking Africa, primarily in Morocco and Tunisia. It operates a mobile app that connects small retailers in these two nations with FMCG multinationals and local producers, enabling them to order and receive products in under 24 hours.
Last October, the YC-backed company acquired Moroccan credit book Karny.ma . The platform, which is like Khatabook, offers credit and bookkeeping services to around 50,000 retailers and enables these merchants to manage the credit that they extend to their customers.
In Morocco, 70% of the population are access to banking, underbanked, or unable to generate continuous income hereby complicating loan access as lenders want them to verify financial stability to repay, which is impossible because they do not have bank accounts.
Normally, Moroccan merchants and store owners make minor loans to their consumers. Karny serves as the instrument that these merchants use to track money movement in and out of their business. As a result, purchasing Karny provides Chari with significant information on the loans that these merchants make to their customers.
“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 CEO Ismael Belkhayat.
Chari is one of the few, if not the only, start-ups to have bought a local branch of a global bank with the acquisition of Axa Credit, the Moroccan credit arm of the French-based Axa Group. According to Chari, the transaction is still subject to permission from Moroccan banking, insurance, and antitrust authorities.
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.
The purchase of Axa Credit will provide Chari with the credit license required to start lending to its FMCG B2B clients (which it already does), who can then lend money to their consumer clients.
Chari is converting merchants and store owners into financing agents for its FMCG B2B clientele. Shop owners understand their customers’ purchasing habits, where they reside, and when and how they are paid, and can undertake credit risk assessments that a traditional bank cannot. Chari provides its merchants with a free credit line; the expense of the loans is passed on to the retailer’s suppliers in the form of a higher distribution margin. In exchange, suppliers receive information on the SKUs they sell to each retailer.
“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 Belkhayat 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 is 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.”
Chari offers its merchants with a free credit line; the cost of the loans is passed on to FMCG suppliers in the form of a higher distribution margin. Suppliers receive information on the SKUs they sell to each retailer in exchange. Shop owners that want to give loans to their end customers receive greater credit lines through Chari, which shares Karny data (on end consumer purchasing behaviour) with FMCG companies who pay for the cost of the higher loans.
Chari intends to charge retailers a start-up fee and low-interest rates in the future, as it gains more customers.
This transaction is significant for a few reasons. First, accolades as a start-up that is upfront with statistics that its counterparts are unwilling to disclose. Although one may argue that this is not a pure tech deal, it does not change the fact that Chari made the purchase price of this agreement public, which is unusual in Africa’s start-up ecosystem.
Second, this deal allows Axa Insurance Morocco to concentrate on its primary business: insurance, which is in line with Axa Group’s global strategy, which has seen similar restructurings 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.