Amigo Loans to carry on under local management in Ireland

Firm began operating in February 2019 and its loans charged an APR of 49.9pc

Amigo Loans Ireland has retained its 10 employees here. Stock image

Jon Ihle

Local management of subprime personal lender Amigo Loans' Irish arm have completed a buyout of the business after its UK parent put the company into wind down last week.

The chief executive of Amigo Loans Ireland, Daniel Hawkins, confirmed that there had been a successful management buyout of Amigo International, the entity that owns Amigo Loans Ireland.

It is understood Mr Hawkins acquired a 100pc share in the business and is now in talks with potential backers to source new financing to bring lending back online.

Amigo Loans Ireland is currently managing a small residual back book of personal loans written in the last four years. However, the terms of the transaction with its former owner, Amigo Holdings, allow the new owner to get back into the Irish market without restrictions.

It is understood the company is having conversations with private equity and venture debt firms to secure a funding line.

Amigo Loans Ireland is exploring whether to continue in its current form or move away from high-cost credit for risky borrowers and into a different market segment. A change in target market would require approval from the Central Bank of Ireland.

The company has retained its 10 employees here and has capacity to write more than €1m a month in new business at its present size, based on how much it was lending before the pandemic.

The Irish operation shrank during the pandemic as its customer base of low-income borrowers struggled to meet repayments, resulting in a high level of arrears.

The Irish operation shrank during the pandemic

A large proportion of the loan book was written off for accounting purposes, but the company has retained its relationships and is pursuing collection on the loans. Amigo Loans Ireland continues to report to the Central Credit Register.

According to the Amigo Holdings annual report for 2022, there is currently just £1.2m in outstanding borrowings in the Irish business.

Amigo Holdings, the UK company, was forced to close its business last Thursday when investors failed to provide the £45m of new capital to keep it afloat.

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.

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

It never had a chance to take 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.