You might have faced this situation once or twice, or maybe never. People living from paycheque to paycheque often find it extremely difficult to manage an emergency like hospitalisation, an unexpected unbudgeted expense, or a utility bill payment in the last days of a month.

What options do they have? Borrow from friends and family or ask for an advance on their salaries? In these times of economic crunch, when price inflation is soaring daily, spiking the household expenditures of a vast majority of salaried persons, these options are no longer available to most people. Even when you can turn to friends and family or borrow in advance from the employer against your paycheque, it takes time, which you may not have at that moment.

Abhi, a fintech company founded in 2021, has come up with a tech-based solution to help salaried people under financial distress cover 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 salaried employees of the startup’s partner companies to withdraw the salary advances based on their accrued wages at any time before payday to cover their unplanned expenses.

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

Often referred to as payroll that works for all, as the fintech funds these salary advances from its own resources, these do not affect the partner employers’ cash flows and balance sheets as repayment is deducted automatically 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 an Ernst & Young (EY) study on the global EWA market, the concept of EWA, a service that helps save employees from falling into debt traps, is fairly new. However, it has seen significant growth globally as the global payday loans market size, valued at $32.48 billion, is projected to reach $48.68bn by 2030.

Therefore the scale of the opportunity for the EWA market players like Abhi is considerable in a country like Pakistan, where half of the employees are getting average salaries of less than Rs77,000 a month, and most exhaust their salaries on household expenditure and bill payment before the end of the month.

Normally, the average amount of unplanned expenses typically borne by employees are within their monthly income, hence having early access to their own salary would resolve the issues for the majority and add to their greater financial security.

The EWA solution can significantly impact workers’ financial well-being, helping them to cover their expenses more efficiently, reduce financial stress, and improve their overall quality of life.

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

According to him, Abhi has so far on-boarded nearly 400 small to large from various sectors companies, with total salaried employees of close to 800,000, a quarter of whom are active users of the startup’s facility. The company has already raised $21 million in funding for the expansion of its operations and plans to tap the UAE and Bangladesh markets in future.

The average advance salary withdrawal size ranges between Rs7,000 and Rs8,000. The number of transactions and size of payday loan swell during Ramadan and around religious festivals and family events.

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

The EWA services offer several advantages to both employees and employers. For example, the product offers employees the flexibility to access a part of their earned salary to regulate their spending at a nominal cost without having to take on costly credit schemes such as credit card loans or borrowing from informal sources at unfavourable terms to ultimately fall into debt traps.

Likewise, it helps employers provide payday loans to their employees without any stress on their cash flows and books and save hundreds of man-hours that would have been spent processing salary advances without any risk or obligation.

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

“This is a win-win solution for both employees and employers. It offers 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 will likely become an essential tool for companies looking to attract and retain top talent in Pakistan’s competitive job market,” argued Mr Ladhubhai.

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

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