S.Africa's Abil in talks to be Edcon's secondary credit provider

JOHANNESBURG, April 25 Fri Apr 25, 2014 9:05am EDT

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JOHANNESBURG, April 25 (Reuters) - African Bank Investments has entered a non-binding agreement with Edcon to be a secondary credit provider for the South African retailer's customers, the two companies said on Friday.

The bank, which also sells furniture on credit, has suffered from a rise in bad loans as debt-laden South Africans struggle to meet their obligations against a backdrop of stubborn unemployment and rising inflation.

Absa, the South African unit of Barclays Africa Group , became the primary credit provider for Edcon customers when it bought the private label store's card portfolio for 10 billion rand ($940 million) in 2012.

"As a secondary credit provider, African Bank would provide credit to Edcon customers who do not fit within the Absa Bank credit criteria," Edcon said in a statement.

Abil said signing the term sheet with Edcon formed the basis for negotiations and customers would be granted credit subject to its lending criteria.

Despite relatively easy access to credit, many South Africans have scaled back consumption, hit by higher fuel and electricity prices and rising interest rates in Africa's most advanced economy.

Retail sales growth in February came in at 2.2 percent year-on-year in February, much lower than the 3.5 percent analysts had expected.

($1 = 10.6327 South African Rand) (Reporting by Helen Nyambura-Mwaura; Editing by Ed Stoddard)

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