Short-term lender Wonga trebles 2011 profit

LONDON (Reuters) - Short-term loan provider Wonga.com more than trebled its earnings last year, benefiting from a surge in applications by cash-strapped Britons, many of whom have had difficulty obtaining short-term credit from mainstream banks.

Net income rose 269 percent to 45.8 million pounds ($74 million) with revenue growing at the same rate to 185 million pounds, the company said on Sunday.

Wonga offers individuals short-term loans of up to 1,000 pounds, which are intended as an alternative to traditional lines of credit such as credit cards and personal loans, and as a means of avoiding unauthorized bank overdrafts.

The number of loans provided in 2011 quadrupled to nearly 2.5 million, meaning Wonga has now provided more than 6 million loans since its launch in 2007.

The firm has faced accusations that its annual percentage rate (APR lending rate), listed on Wonga.com as 4,214 percent, takes advantage of the financially vulnerable.

In an interview with Reuters, chief executive and founder Errol Damelin said the criticism was unjust because the loans were not meant to be taken out on a long-term basis.

"It is not about the desperation of customers. We reject about 60 percent of applicants. This is about a service that is important to people because people do run out of cash from time to time. That is the reality of the world and it is about delivering it in a way that people like," Damelin said.

Wonga, which guarantees borrowers will receive their money within 15 minutes of approval, said 10 times more customers had taken out loans via their mobile phones in 2011 and nearly 1,000 people were downloading a Wonga iPhone app every day.

The company launched a credit service for small businesses in May and Damelin said it was hoping to fill a gap in the market from a lack of lending by mainstream banks which are shrinking their balance sheets to meet regulatory requirements.

Wonga is offering loans of 3,000-10,000 pounds to companies for period from one week to 52 weeks.

"Very often for small businesses that is all that is needed but they need it quickly. Most small businesses go to the wall because of cash flow problems not P&L problems," Damelin said.

(In this story the company corrected net income rise in second paragraph to 269 percent, not 225 percent)

(Editing by Dan Lalor)