The proposed starting structure should be a closed-ended fund acquiring whole, eligible borrower claims. The manager should control loan selection, pricing and portfolio decisions. The originator can service the portfolio under a replaceable mandate, with its first-loss commitment documented separately. An Exempt Fund is the working option; a Qualified Investor Fund, or QIF, requires a different investor and subscription assessment.
This recommendation depends on three matters being established before launch: the fund's permitted assets and relationships, the South African treatment of each loan category, and the approved movement of acquisition money and collections.
- Acquire enforceable rights against eligible borrowers, with a documented transfer of the relevant security. A funding agreement with the fintech does not give the fund the same rights.
- Keep investment decisions and effective supervision with the ADGM manager. Give the servicer defined authority, reporting duties and a workable replacement process.
- Classify borrowers, loans and cross-border payments before fixing the purchase programme. First-loss protection and token records cannot repair an impermissible loan or defective transfer.
Choose the fund and manager together
The private-credit guidance of the Financial Services Regulatory Authority (FSRA) describes an Exempt Fund or QIF offered to Professional Clients. Its September 2026 specialised-manager guidance lists minimum investments of US$50,000 for an Exempt Fund and US$500,000 for a QIF. Investor classification remains a separate question from the amount invested. These guidance documents must be read with the operative fund and conduct rules. (FSRA, Guidance: Private Credit Funds, VER01.040523, paras. 1.2 and 2.3; Supplementary Guidance: Regulatory Framework for Specialised Fund Manager Categories, VER01.160926, Annex 1.)
The manager needs a Financial Services Permission covering Managing a Collective Investment Fund. The September guidance describes a Sub-Threshold Fund Manager route for closed-ended, non-retail funds with aggregate committed capital no greater than US$200 million; a host-manager business does not qualify. Its Institutional Fund Manager route has separate eligibility conditions, including a US$5 million minimum investment. The investor mix, planned capital and operating model must determine whether either route fits. (Specialised Fund Manager Guidance, paras. 8–11 and 19–23.)
For this proposal, select a manager able to supervise South African credit, servicing and recoveries. Confirm its permission, restrictions and resources against the actual mandate. A manager appointment should not leave the fintech making every investment decision while the appointed manager merely approves reports.
Decide whose credit risk the fund will acquire
Private credit is not an unrestricted permission to fund another lending business. FSRA's private-credit guidance identifies restrictions concerning natural persons, Affected Persons, collective investment funds, speculative investment and other lenders. The published September 2025 text of the Fund Rules (FUNDS) prohibits credit provided to, or for the benefit of, the listed persons. Both the recipient and the economic purpose therefore require examination. (Private Credit Funds Guidance, para. 3.1; FUNDS, VER11.250925, r. 13A.3.1.)
A warehouse loan to the fintech raises a different eligibility question from acquiring claims against its business borrowers. A related originator also requires separate analysis of prohibited credit and conflicted asset purchases. Approval of a conflict cannot be assumed to permit otherwise prohibited financing. Whole-loan purchase is the preferred route only if its substance and beneficiaries satisfy the applicable restrictions.
Three structures deserve comparison.
Direct origination. The fund becomes the original creditor. It can specify the loan terms and approve credit before disbursement, but must establish its own South African lending position. The local fintech's registration cannot simply be attributed to the fund.
Purchase of existing loans. The originator enters the loan, then transfers the selected claim to the fund. This suits a continuing origination business, provided the fund can reject loans and verify the transfer. The acquisition must address existing borrower defences, unpaid commitments and security; a purchase does not cleanse defects in the original agreement.
Participation. A contract may give the fund only a right to payments from the originator. Unless the documents establish direct rights, the fund should not describe itself as the borrower's creditor. Originator insolvency, collection control and enforcement then become additional exposures. FSRA guidance recognises participation and purchase as possible private-credit structures, but their contractual rights remain different. (Private Credit Funds Guidance, para. 2.2.)
The distinction between owning an asset and holding a claim on an intermediary also appears in the Kenyan export-invoice funding analysis. For this fund, repeated loan selection and ongoing servicing add a separate management problem.
Classify the South African loans before buying them
“Business loan” does not establish an exemption from the National Credit Act, or NCA. A sole trader remains a natural person. For juristic borrowers, the Act distinguishes the borrower's size and the agreement's classification. (National Credit Act 34 of 2005, ss. 4 and 9.)
The corporate exclusion applies where the borrower's asset value or annual turnover, aggregated as prescribed with related juristic persons, meets the R1 million threshold when the agreement is made. Below that threshold, a large agreement can fall outside the Act. The R250,000 threshold must be applied to the correct agreement type: a revolving credit facility does not become a large agreement merely because its limit exceeds that figure. In-scope juristic borrowers also receive a different set of protections under section 6. (NCA, ss. 4(1)(a)–(b), 6 and 9(3)–(4); GN 713, GG 28893, 1 June 2006.)
An assignee can be a credit provider under the Act. Moving the creditor offshore does not itself remove the Act's territorial application. The registration threshold is zero for the prescribed calculation, so registration must be resolved before acquiring in-scope assets. (NCA, s. 1, definition of “credit provider”, para. (i), ss. 4(3)–(4) and 40, as amended by Act 19 of 2014; GN 513, GG 39981, 11 May 2016.)
Build a loan eligibility schedule recording legal borrower identity, connected entities, size evidence, agreement type and date. Include permitted use, amount, security, payment history and compliance defects. For an initial programme, restricting acquisitions to identified corporate loan categories can simplify the launch. It still requires evidence for each exclusion.
The originator's anti-money-laundering position also needs evidence. Schedule 1 to the Financial Intelligence Centre Act (FIC Act) expressly reaches businesses providing credit under the corporate exclusions in NCA section 4(1)(a) and (b). NCA exclusion is therefore insufficient to dismiss FIC Act obligations. (Financial Intelligence Centre Act 38 of 2001, Sch. 1, item 11, as substituted by GN 2800, GG 47596, effective 19 December 2022.)
Transfer the claim, security and collection control
The sale documents should identify each debt and the effective cession. Review restrictions on transfer and rights dependent on the creditor's identity. South African cession analysis turns on the agreement and nature of the right; consent cannot be treated as universally required or universally unnecessary. (University of Johannesburg v Auckland Park Theological Seminary [2021] ZACC 13, paras. 55–60 and 86.)
Obtain borrower notices, payment directions and evidence of receipt. Notice is generally distinct from the act of cession, but an uninformed debtor's good-faith payment to the former creditor can matter. (Momentum Group Ltd v Van Staden NO [2009] ZASCA 60, para. 13.)
Review each mortgage, notarial bond, guarantee and security cession separately. Identify registration, delivery, consent or other steps required for that instrument. The transaction opinion should address the fund's enforcement rights and the consequences of originator insolvency. A contract calling the purchase a sale does not settle those questions.
Keep the entire borrower claim with its designated holder where feasible. The originator's retained economics can sit in a funded reserve. A subordinated fund interest needs a separate South African solicitation analysis. The Collective Investment Schemes Control Act, or CISCA, uses a broad definition of “members of the public”; professional status alone does not establish its private-venture exclusion. If section 65 approval is required, foreign-scheme conditions on liquidity, regular redemptions and lending may prevent this closed-ended credit strategy from qualifying. Resolve that offering route before offering units locally. (CISCA, ss. 1 and 65; FSCA CIS Notice 1/2026, paras. 4(4)(c)–(d), (g) and 13.) Splitting a claim between parties introduces additional consent and enforcement questions. Collection accounts need clear ownership, reconciliation, remittance deadlines and controls against use for the servicer's own expenses.
Settle the exchange-control route before signing
Ask the South African Authorised Dealer to classify the actual transaction: direct inward lending, acquisition of existing debts, payments under a participation, security and the retained first-loss interest. An approval or reporting route for one does not establish the route for the others. Resident funding of an offshore junior interest requires its own assessment. (Exchange Control Regulations 1961, regs. 2, 3 and 10(1)(c); SARB, Currency and Exchanges Manual for Authorised Dealers, 8 October 2026, sections B.2, G.(C) and I.3(B).)
For inward loans within its delegated authority, the Authorised Dealer applies the manual's conditions and reporting process. The October manual uses a market-related interest test in the currency's country or relevant trade, with additional documentation for related-party transactions. Do not price the facility using an older interest ceiling. Departures from delegated conditions require the appropriate Financial Surveillance referral. (SARB Manual, I.3(B)(i)–(iv), especially (iv)(a)(gg), and (v)(a)(ll).)
Document currency conversion, purchase payments, interest, fees and collection remittances. Model withholding tax and any contractual gross-up before agreeing investor returns. Reserve mechanics and repurchase obligations should be included in that assessment because they change the payment flows.
Give the manager decisions and the servicer defined powers
The operating agreements should allocate functions in terms that can be tested against actual conduct.
The originator prepares borrower files and underwriting recommendations. The manager approves eligibility criteria, credit decisions, acquisition pricing and exceptions. An administrator can perform valuation calculations, but the manager should control methodology and challenge assumptions. The servicer handles payment administration and collections within agreed limits; restructurings, write-offs and enforcement decisions need specified approval thresholds.
These proposed controls respond to the credit assessment, monitoring, collateral and valuation requirements in the published private-credit rules. They should be supported by access to loan files, bank reconciliations and staff, with an audit trail for decisions. (FUNDS, VER11.250925, r. 13A.2.1.)
Assess the South African provider's activities separately. Advice or intermediary services concerning a financial product can require authorisation under the Financial Advisory and Intermediary Services Act; the product and actual role decide the result. Ordinary administration should not be labelled discretionary investment management without examining the mandate. Paid debt collection also requires classification under the Debt Collectors Act, including its defined exclusions. (Financial Advisory and Intermediary Services Act 37 of 2002, ss. 1 and 7; Debt Collectors Act 114 of 1998, ss. 1 and 8.)
The servicing agreement should specify performance measures, arrears reporting, complaint handling, subcontracting and termination events. A replacement servicer needs accessible records, payment arrangements and authority to act. Test the handover before relying on it during a failure.
Borrower files require a lawful sharing arrangement. Classify responsible parties and operators, document the applicable security duties and establish a permitted cross-border transfer route. Calling the manager an operator or obtaining a non-disclosure agreement does not establish these conditions. (Protection of Personal Information Act 4 of 2013, ss. 19–21 and 72.)
Price conflicts and first loss explicitly
The manager should compare acquisition prices and servicing fees with supportable independent evidence. Identify ownership links, advisory roles and fund holdings before applying the Affected Person rules. The published Exempt Fund provisions require specific safeguards for affected-person transactions; QIFs have a different application rule. Do not copy an Exempt Fund approval process into a QIF without checking its legal basis. (FUNDS, VER11.250925, rr. 12.1.1(3) and 12.3.13.)
First loss needs a defined amount, funding deadline, loss waterfall, replenishment rules and release conditions. A promise by the originator to cover losses is only as dependable as its ability to pay when required. A funded reserve reduces that particular dependency but still needs valid ownership and control arrangements.
Limit repurchase obligations to specified events and price their consequences. Broad credit recourse can change both the fund's effective exposure and the legal analysis of the sale. Retention should reward loan performance across time; paying all fees at origination while allowing early withdrawal of protection creates conflicting incentives.
Start with no fund borrowing as a proposed commercial restriction. Set borrower-group, sector, maturity and currency limits against the applicable fund requirements. Size commitments and cash reserves for undrawn loans, operating costs and recoveries. The fund term and distribution policy should accommodate slow collections, with no promise of routine redemption from illiquid loans.
Report arrears, defaults, restructurings, collateral coverage, realised recoveries, concentration and first-loss coverage. Stress borrower failures, delayed enforcement, currency movements and servicer failure together. Portfolio information should allow investors to see when retained protection is being depleted.
Keep token records a separate workstream
Optional tokenised records should follow the unit rights and investor restrictions chosen for the fund. Identify the legally effective register, the person maintaining it, and the event that transfers ownership. Specify eligible transferees, identity checks, correction powers, lost-key recovery and reconciliation with other records.
FSRA's Digital Securities Guidance applies its analysis to the rights represented and the activities performed. A token label cannot supply fund-management, distribution or trading permission. (FSRA, Guidance: Regulation of Digital Securities Activities in ADGM, VER02.240220, paras. 14–18 and 87–92.)
The separate RWA Platforms discussion addresses the operator and investor journey. Any later use of units as collateral needs another assessment, as the Singapore fund-unit collateral analysis explains. Transferable records do not establish a buyer, redemption capacity or enforceable collateral rights.
Documents and evidence needed to proceed
First, settle the borrower categories, ownership chart, investor population and manager mandate. Obtain a permission analysis covering both jurisdictions and written evidence of the relevant exchange-control route.
Second, prepare the fund constitution, offering document and subscription terms. Connect them to the loan eligibility policy, purchase and cession agreement, security documents, servicing mandate, first-loss terms, valuation policy and data-sharing arrangements. Record the required conflict decisions and approval evidence.
Third, test a complete loan file through acquisition, payment collection, arrears escalation and replacement servicing. Confirm legal title, account control, reconciliation and investor reporting before scaling the programme. Add token records only after the underlying fund and loan processes can support their promised legal effect.