- The online microlender Wonga has been rescued from collapse thanks to a cash injection.
- The company has been forced to write off loans in the UK after failing to properly check whether customers can afford them.
- But it is "business as usual" in South Africa, the local operation says.
An emergency cash injection of R178 million has saved microlender Wonga from collapse – for now.
The UK firm, which has operations in South Africa, is currently facing immense pressure after the British authorities forced it to write off loans worth R4 billion because Wonga failed to properly check whether customers could afford them.
Wonga’s shareholders, two venture capital funds, have pledged the money to prop up Wonga.
Wonga was started in the UK more than a decade ago by two South Africans, the Klerksdorp-born Errol Damelin and, Jonty Hurwitz from Johannesburg.
Damelin and Hurwitz built an online lender that offered short-term, high-interest loans at unheard of speed. High-profile, brash TV advertising campaigns helped fuel growth.
Wonga's simplicity and speed — easy-to-use sliders enable users to apply quickly, and have money in their account within hours — helped it to success almost overnight.
But consumer activists, including the Church of England, complained that Wonga was a “legal loan shark”, and eventually the authorities cracked down on the company. Hurwitz left Wonga in 2011, and Damelin in mid-2014. Damelin has since achieved some success in investing in 30 tech businesses, and has been called the “messiah of London's fintech scene”.
Wonga launched South African operations in 2011, and has since funded almost 3 million loans.
“The current developments in the UK do not impact the South African operations and it is business as usual for Wonga Finance SA,” Wonga SA CEO Brett van Aswegen told Business Insider South Africa.
Van Aswegen says the company – which traditional offered only 30-day loans - is currently expanding its offering in South Africa, after it launched new loans with terms of up to 6 months at the start of the year.
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