Johannesburg - Life insurer MMI Holdings entered into a mutually beneficial partnership with African Bank on Monday in which it would extend banking services to its clients by offering loans and take deposits.
The deal would enable each group to leverage each other's strengths through offering a wider range of products and services.
The lending venture would see MMI offering needs-based credit to its customer base through its various distribution channels.
The long-term life insurer expects to build a loan book in excess of R10 billion in the first five years.
African Bank will be the exclusive unsecured credit provider for MMI clients and credit will be granted within the parameters of a mutually agreed credit policy.
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The insurance opportunity will enable African Bank to provide MMI insurance products to its customer base through the various African Bank distribution channels. MMI will become the insurance partner to African Bank on an exclusive basis.
The third venture will involve the provision of transactional banking capabilities to enable the MMI value proposition.
This partnership between African Bank and MMI is an extension of an already existing relationship with MMI's wholly-owned subsidiary Guardrisk. Guardrisk currently underwrites the African Bank's credit life insurance, insuring African Bank's risk exposures through a cell captive structure.
African Bank chief executive, Brian Riley said they were delighted to have concluded this partnership with MMI.
"[The [partnership] will enable the bank to enhance the value offered to our customers and it will broaden our reach into a new customer base," Riley said.
African Bank was rescued and recapitalised by the South African reserve Bank after its parent, African Bank Investments Limited, collapsed in 2014 because of unsecured loans.
MMI chief executive, Nicolaas Kruger said the partnership with African Bank as it extended their product offering to include banking services to their clients.
"We are also excited to be extending our financial wellness offering to more than 1.2 million African Bank clients, enabling them to incorporate important solutions into their financial planning process," Kruger said.
The first phase of the venture will be with Metropolitan, a division within MMI Group Limited, and is expected to go live in the second half of 2017.
The lending activities will become fully functional during the first half of 2018. The deal is subject to regulatory approval.