African Bank lent recklessly — then the central bank had to split it in two

African Bank Investments Limited (ABIL) was South Africa’s largest unsecured lender, built on a business model of issuing high-interest credit to low-income borrowers without collateral. The bank grew rapidly in the 2000s, reporting strong profits as it expanded its loan book. The unsecured lending market in South Africa was booming, and African Bank was the dominant player.

In August 2014, the bank announced a massive write-down of bad loans, revealing that its lending standards had been dangerously lax. The share price collapsed from R27 to under R1 in days. The South African Reserve Bank placed African Bank under curatorship on 10 August 2014, citing poor lending practices that had resulted in unmanageable write-downs.

A consortium of six banks — Standard Bank, FirstRand, Absa, Nedbank, Investec, and Capitec — together with the Public Investment Corporation, funded a rescue. The old bank was split: a new African Bank took the viable assets, while Residual Debt Services Limited held the bad loans. The SARB ended up owning 50% of the new bank. The new African Bank reopened in April 2016.