Local startups are striving to position Uganda as a leader in the emerging trend of on-demand pay, allowing employees to receive payments whenever they need them, bypassing traditional payday schedules. This trend is gaining momentum across the continent.
In a notable collaboration, Ugandan startup Thiqa Digital Finance and South Africa’s Paymenow have partnered to introduce earned wage access (EWA) solutions to Uganda’s government employees. This initiative represents a significant step towards empowering workers and transforming financial services in the region. The partnership places Uganda among the pioneers in the EWA space, highlighting the broader landscape of fintech innovation across Africa.
Earned Wage Access (EWA), also known as ‘on-demand pay’ or ‘salary on-demand,’ fundamentally changes the traditional pay cycle by allowing employees to access a portion of their earned wages before the usual payday. EWA providers typically manage payroll for employers and generate revenue through fees.
The collaboration aims to tackle the liquidity gap experienced by Ugandan workers between paydays, providing them with enhanced financial flexibility and stability. Danielle Lavan, CEO of Thiqa, expressed optimism about the partnership, stating, “By collaborating with Paymenow, we are introducing their direct payroll integration solution to Ugandan government employees. This will help them bridge the gap between paydays and manage unexpected expenses. Paymenow’s success in Southern Africa, with a customer base of over half a million users, is remarkable, and we look forward to replicating this success in Uganda.”
Leveraging Thiqa’s Islamic finance platform and Paymenow’s EWA solution, Ugandan civil service employees will have enhanced control over their finances. By effectively turning every day into payday, this initiative aims to alleviate the financial stress imposed by traditional payroll systems.
Workers often face constraints due to limited access to credit and cumbersome banking processes. EWA solutions offer a convenient and flexible alternative, providing timely access to earned wages and promoting financial resilience and empowerment among workers.
The need for EWA arises from the challenges many workers face in obtaining timely and affordable credit. Traditional financial institutions often impose cumbersome procedures, while payday lenders charge exorbitant interest rates, leaving employees with few options to address their immediate financial needs.
EWA has significant potential in the African labor market, with the liquidity gap between paychecks representing a remarkable USD 30 billion funding opportunity across Africa each month. This was highlighted by Chikodi Ukaiwe, Founder/CEO of Nigerian EWA platform Salad, in a 2022 conversation with Afridigest.
EWA offers a practical solution by providing quick and convenient access to earned wages without high fees or long wait times. This service is a lifeline for workers dealing with unexpected expenses or cash flow issues, improving worker welfare and retention and ultimately enhancing productivity.
The journey to widespread adoption of EWA in Africa faces considerable hurdles. The continent grapples with low financial literacy rates and complex regulatory environments, creating significant obstacles for EWA providers. Companies like Thiqa and Paymenow must navigate these challenges, ensuring compliance with regulatory frameworks while protecting consumer interests.
Despite these difficulties, the future of EWA in Africa appears bright, fueled by the continent’s thriving fintech ecosystem and increasing demand for innovative financial solutions. Other key players in the EWA sector include Pade, SeamlessHR, and Earnipay in Nigeria; Khazna and Nowpay in Egypt; Floatpays and Jem in South Africa; and Kenya’s WorkPay. These startups leverage technology to unlock what is colloquially known as ‘streaming salary.’
Encouraging signs are emerging. For instance, Pade, a Nigerian HRtech startup, announced a USD 500K pre-seed round in February and assisted over 100 African businesses in processing more than NGN 11 billion in payroll in 2023. Their Year-in-Review reported NGN 3.07 million in EWA disbursed in Q4, managing over 10,000 employee profiles.
EWA in Africa offers both opportunities and challenges. Despite the demand due to the liquidity gap between paychecks, providers struggle with converting reluctant targets. A November 2023 survey by TechCabal of 101 individuals showed that the majority (70.6%) preferred receiving their salaries at the end of the month rather than requesting portions of their earned wages on a weekly or daily basis.
Picture Cred: Tech In Africa
