Borrow from yourself – Newspaper

You may have encountered this situation once or twice, or perhaps never. People who live paycheck to paycheck often find it extremely difficult to handle an emergency such as a hospitalization, an unexpected unbudgeted expense, or a utility bill payment in the last few days of a month.

What options do they have? Borrow from friends and family or ask for an advance on their salary? In these times of economic crisis, when inflation is increasing daily, increasing the household expenses of a large majority of salaried people, these options are no longer available to most people. Even when you can turn to friends and family or borrow in advance from your employer against your paycheck, it takes time, which you may not have at the moment.

Abhi, a fintech company founded in 2021, has come up with a technology-based solution to help salaried individuals in financial distress meet their emergency expenses in real-time at any time of the day or night through its Earned Wage Access (EWA) or On-Demand Pay service, AbhiSalary.

The service enables the officers of the startup’s partner companies to withdraw the salary advances based on earned salary anytime before salary to cover their unscheduled expenses.

Fintech Abhi enables employees of partner companies to withdraw salary advances at any time before salary

Often referred to as a salary that works for everyone, as the fintech finances these salary advances from its own resources, these do not affect the partner employers’ cash flow and balance sheet as repayment is automatically deducted from the employee’s salary on payday. It takes less than 30 seconds and two clicks for a registered user to access the funds on the startup’s mobile app or SMS or WhatsApp feature with a flat Rs100 per transaction fee.

In Pakistan, according to a study by Ernst & Young (EY) on the global EWA market, the concept of EWA, a service that helps rescue employees from falling into debt traps, is fairly new. However, it has seen significant growth globally as the global payday loan market size, valued at $32.48 billion, is projected to reach $48.68 billion by 2030.

Therefore, the scope of opportunity for EWA market players like Abhi is significant in a country like Pakistan, where half of the employees earn average salaries of less than Rs77,000 a month, and most spend their wages on household expenses and bill payments. before the end of the month.

Normally, the average amount of unplanned expenses typically borne by employees is within their monthly income, and therefore having early access to their own salary will solve the problems for the majority and increase their financial security.

The EWA solution can have a significant impact on workers’ financial well-being, helping them meet their expenses more effectively, reduce financial stress and improve their overall quality of life.

“The EWA solution is just like any other employee benefit program like health insurance,” Ali Ladhubhai, Abhi’s co-founder and chief operating officer (COO), told this correspondent last week from Karachi over phone. “You can’t always borrow from your employer or friends and family. For example, what would you do if you had a hospital emergency late at night? We transfer the EWA advances to users’ bank accounts or digital wallets in real-time in seconds to help them in times of emergency.”

According to him, Abhi has so far brought in nearly 400 small to large companies from various sectors, with a total paid staff of close to 800,000, a quarter of whom are active users of the startup’s facilities. The company has already raised $21 million in funding for business expansion and plans to tap the UAE and Bangladesh markets in the future.

The average advance salary withdrawal size varies between Rs7,000 and Rs8,000. The number of transactions and the size of payday loans increase during Ramadan and around religious festivals and family events.

“The trend has definitely increased due to inflationary stress on household budgets and due to the increase in energy and fuel prices in recent months,” he replied to a question.

The EWA services provide several benefits for both employees and employers. For example, the product gives employees the flexibility to access part of their earned salary to regulate consumption at a nominal cost without having to take on expensive credit arrangements such as credit card loans or loans from informal sources on unfavorable terms to ultimately fall into debt traps .

Likewise, it helps employers provide payday loans to their employees without any stress on their cashflows and books and save hundreds of man hours that would have been spent processing payday advances with no risk or commitment.

The EY study shows that companies that provide greater financial flexibility and security can increase employee retention, reduce absenteeism and reduce the administrative burden associated with traditional payroll systems.

“This is a win-win solution for both employees and employers. It gives workers greater financial security and flexibility while reducing the workload and costs associated with traditional payroll systems. As the popularity of earned wage access continues to grow, it is likely to become an important tool for companies looking to attract and retain top talent in Pakistan’s competitive job market,” asserted Ladhubhai.

“EWA may be a new concept in Pakistan, but it is quickly gaining popularity as more companies recognize the value it can bring to their employees and business operations. Our aim is to empower salaried people financially and change the landscape of how corporate payrolls are managed, digitizing manual payment processes and being there for people when they need us most.”

Published in Dawn, The Business and Finance Weekly, 27 February 2023