For many employees in Africa, payday is just once a month, but for these employees, bills arise daily. The typical solution has been getting salary advances from either employees or banks. Where that was impossible, they turned to loan sharks, who gave them the money at significantly high interest rates.
While employees and banks are frequent sources of salary advances, banks often have strict requirements for giving these loans, while employees may have cash flow challenges. All this could hinder their willingness or ability to grant an employee's request.
Enter earned-wage access startups. Over the last five years, these startups have sprung up around the continent, offering employees access to a percentage of their earnings before payday.
One of these startups, Zofi Cash, a Ugandan fintech startup, has raised $1 million from Advancly in a pre-seed round.
The fintech, which was founded in 2021 by Paul Kirungi (CEO) and Gordon Turibamwe (CTO), is one of a growing number of African fintechs providing on-demand salary access to Africans. Through a web app, employees can request up to 50% of their monthly salary as an advance. When the advance is approved by the employer, it is then disbursed to a bank account or mobile money.
Over the last year, Zofi Cash has facilitated transactions worth more than $300,000, a feat that Kirungi credits with helping them raise capital in a difficult funding environment.
"We have strong metrics. In a year, we have been able to make transactions worth $300,000. Raising this funding has been extremely hard, but our commitment to making sure no one has to wait for a payday to receive their salary kept pushing us," Kirungi said.
Although Zofi Cash has more than 20,000 employees on its waitlist, it has only been able to cater to about 3,000 of them. With this funding, which is purely debt, the startup hopes to cover more of these individuals.
In Uganda, Zofi Cash will see competition for its services from Qiribu, a startup that launched a year before it did. But should it spread its wings outside the East African country, it would come up against the likes of Workpay, Salad, and Earnipay.