Chari, a Moroccan B2B e-commerce and retail startup, has confirmed that it has bought Axa Credit, the credit arm of Axa Assurance Maroc, for $22 million.
The announcement follows Chari’s recently completed seed expansion round, which valued the company at $100 million and saw it begin offering BNPL services to its customers. It is one of the few African startups that has made its valuation public.
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.
Why The Acquisition
Chari is one of the few, if not the only, startups to acquire a local branch of a global bank with the acquisition of Axa Credit, the Moroccan credit branch of the French-based Axa Group. According to Chari, the deal is still awaiting permission from Moroccan banking, insurance, and antitrust authorities.
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CEO Ismael Belkhayat noticed that Axa was exiting Morocco’s credit sector, which was a sideline to its primary insurance business, and regarded Chari as a good 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.
With the acquisition of Axa Credit, Chari will be able to begin extending credit to its FMCG B2B clients (which it already does), who will then be able to lend money to their consumer clients. It’s a B2B2C financing model, if you will.
Shop owners, according to Chari, know their customers’ spending habits, where they reside, and when and how they get paid, and can thus undertake the credit risk assessment that a traditional bank cannot.
This transaction is also notable for a number of reasons. For starters, bragging rights as a startup that is honest with numbers that its competitors might otherwise refuse to provide. Even if this isn’t a pure tech deal (a firm buying another startup), it doesn’t change the fact that Chari made the purchase price (and, in the past, the valuation) of this agreement public, which is unusual in Africa’s startup ecosystem.
Second, this transaction allows Axa Insurance Morocco to refocus on its primary business: insurance, which aligns with Axa Group’s worldwide strategy, which has seen similar restructurings in its growing regions.
“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, despite only raising $7 million so far, how has Chari been able to fund this deal? Belkhayat explained that the company’s acquisition funds come from a combination of seed funding, a leveraged buyout (local bank debt), and negative working capital from a transaction with FMCG manufacturers (roughly $5 million). In addition, the company is preparing to raise a significant Series A financing.
In Morocco, 70% of the population is unbanked, underbanked, or unable to demonstrate recurrent income. They may find it difficult to obtain a loan since lenders require them to demonstrate financial stability in order to repay, which is nearly impossible for them to do because they do not have bank accounts.
Chari believes it can assist this group of people, but how does it plan to lend to them and be reimbursed if they have no credit history or database on which to judge their creditworthiness? Belkhayat believes that its recent acquisition of Karny is the solution.
“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.”
In addition 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 provides merchants with a free credit line; the expense of the loans is passed on to FMCG suppliers in the form of a greater distribution margin. Suppliers receive data on the SKUs they sell to each retailer in exchange. Chari provides greater credit lines to shop owners who want to offer loans to their end customers, and Chari shares the data collected from Karny (on end customers’ purchasing behavior) with FMCG firms who pay for the higher loans.
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Chari intends to charge merchants a setup fee and low-interest rates in the future, after it has a larger user base.
A Look At What Chari.ma Does
Chari is a B2B startup that collaborates with FMCG multinationals and local producers to provide goods to mom and pop shops in under 24 hours. It was launched in January 2020 by husband and wife Ismael Belkhayat and Sophia Alj. Before joining the ranks of STATION F in Paris, Chari was incubated within the family-owned H&S Invest Holding. More than 10,000 grocery businesses in Morocco already use it.
Chari ecommerce Chari ecommerce Chari ecommerce Chari ecommerce
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer