Amigo bows out of the Irish subprime lending market

Loans had an APR of 49.9pc which added more than €75 for every €100 borrowed over a standard three-year term

Amigo’s chief executive Gary Jennison

Jon Ihle

Amigo Loans Ireland is getting out of the subprime lending market after its UK parent company was forced to close the business when investors failed to provide new capital to keep it afloat.

The firm, which specialises in providing high-cost credit to low-income borrowers, said on Thursday it would stop lending “with immediate effect” and start and orderly wind-down of the business over the next 12 months.

Amigo will continue to collect payments on its relatively small book of £1.2m (€1.4m) in personal loans while the liquidation of its parent company continues.

The company’s 12 employees in Ireland will continue to be paid according to their contractual terms, the company said in a stock market statement.

The failure of Amigo’s business model raises questions about the viability of providing credit to borrowers outside the mainstream, especially in an environment of rising rates and challenging economic conditions.

“Raising a material sum of fresh equity for what was essentially a relaunch of the business was always likely to be a serious challenge, notwithstanding the need for responsible, well-regulated lenders in the mid/high-cost credit market,” said Goodbody analyst Ronan Dunphy.

Amigo Loans Ireland began operating in February 2019 offering guarantor loans to people who had been turned down by banks or credit unions. The loans were charged at an APR of 49.9pc, which added more than €75 for every €100 borrowed over a standard three-year term.

However, the business pitched itself as a cheaper option than Provident, the subprime personal lender that ceased trading last year, and a friendlier option than doorstep moneylenders.

It never quite took off, though, and accounted for less than 1pc of the group’s net loan book by 2022 and just £1m of annual revenue and £500,000 of profit.

Ultimately, Amigo was unable to convince shareholders to back its bid to raise the £45m in new equity it needs to continue after three years of declining business volumes.