The Socially Responsible Alternative To Predatory Lending
Wagefit offers responsible access to earned wages when needed, because life's emergencies don't wait for payday.
There are no loans, no credit, no interest charges and no penalty fees just a transaction fee.
Problem: What problem is Wagefit trying to address?
A large proportion of Nigerian households are unbanked or underbanked – in fact as at today, April 29, 2022, and not withstanding that the Bank Verification Number (BVN) scheme has been in existence since 2014 – only 54 million associated BVN linked bank accounts exists. Whilst this figure continues to grow as more people open bank accounts and link their BVN to their bank account it leaves in excess of 100 million people unbanked or underbanked. The underbanked, in particular, face high costs to access funds because they don't have much alternatives than to use expensive short-term-loan facilities. They make extensive use of payday advances or loans and pawn shops, as well as other alternative financial services, because they don’t utilise traditional banking services. The interest rates and fees for these services are typically very high, representing a significant percentage of these individuals’ incomes. Sometimes the manner some of these firms adopt to get overdue funds are questionable and borderline abusive. Wagefit Technology Ltd aims to provide an alternative approach and eliminate or reduce significantly the need for these often predatory loans and alternative financial service with its Wagefit product.
Solution: What is the proposed solution?
Wagefit Technology Ltd has developed a system through which employees may be paid on a real time basis into their bank accounts. The core of the solution is our WageCalc algorithm, which tracks and values the time employees have worked between payroll periods. This information is used to automate early disbursement of unpaid accrued wages and their subsequent deduction from the next payroll. Employees can access earned but unpaid wages for a fee akin to an ATM or POS fee. The service is targeted at any employee (lower-paid, hourly, banked & underbanked workers) who simply sometimes need access to a portion of their unpaid earned wage as they proceed through the month (or pay period) or those who typically turn to payday loans to bridge their cash flow challenges. Wagefit significantly decreases employee cost of access to short term cash compared with utilising payday loans.
How does it Work?
Example walkthrough of how this solution works and makes a difference.
Let's take an example where an employee without access to cheap credit has an unplanned N10000 expense and won’t be paid for another 10 days, so they borrow N10000 from a payday lender. In two weeks, they pay back N10000 plus a percentage in interest fees, or they roll the loan over for an additional fee. If this employee is a typical payday loan user, they may access five to nine loans per year paying exorbitant fees in the process. If the employee were enrolled in Wagefit through their employer, they would have immediate access to their earned but unpaid wages for a POS-like fee, saving the employee considerable money, avoiding undue financial stress, and halting the debt trap by eliminating their need to use predatory alternative financial services.
In this example it's important to note a few subtle reasons payday advances and loans, as well as other alternative financial services can be a debt incubator:
1. monthly % rates doesn't mean annual % rates with the latter significantly higher;
2. very few people pay their loans off in 4 weeks let alone 2 weeks thus they seldom incur only 1 months interest;
3. going over the loan tenure generally incurs late fees.
Easy to see how each point in the incubator could hatch and spiral into a debt trap. None of these points applies for our earned wage access solution.
Other Information
The example illustrated above plays out in different settings every day with the payday still a few days away i.e. it could be the employee:
- whose vehicle developed an unexpected fault and has to have it fixed else going to work becomes an inconvenience.
- whose household utility bill(s) is due.
- who has a family member that needs urgent medical care.
- that simply needs to cover their transport fare to work.
- that needs to pay for that recently moved into accommodation.
- who needs to pay their children's school or tuition fees.
- and more..
Fit your wage.
An important step to financial wellbeing is access to cash (liquidity) to address our problems which occurs on a daily basis essentially, you see, life does not wait for payday.
Following on from liquidity is education but not strictly the formal kind we know here, amongst others, we mean financial literacy so being able to understand how interest rates work and differ for monthly and annual rates; why and when penalty fees are applied; how to budget & forecast our income & expenditure; what % of our wage is a good threshold to allocate to shelter, food, clothing etc.; and how and when to put money away for a rainy day (i.e. Save).