Afrigather Nigeria’s casual financial system is a serious supply of financial progress and productiveness, contributing about 50% to the nation’s GDP. This sector is usually populated by the economically deprived, and operations are characterised by unsafe and unhealthy working situations/environments, unregulated abilities and measures of productiveness, low or irregular incomes, and importantly, lack of entry to markets, job safety, insurance coverage, and expertise, amongst different issues.
As a result of these challenges, folks working within the casual financial system hardly have ample entry to monetary providers like banking, insurance coverage, credit score, and pensions. That is largely attributable to components like the shortage of infrastructure in rural areas, lack of knowledge, and the strict entry necessities which poorer folks simply can’t afford. Whereas the present pension act of July 2014 mandates employers with not less than 15 staff to take part in a contributory pension scheme for his or her staff, these advantages are usually out of the attain of the typical Nigerian working within the casual sector.
Awabah is a monetary providers startup based in 2021 that’s offering monetary leverage and safety for Nigeria’s non-formal work sector. In easier phrases, Awabah supplies life and medical insurance, micro pensions, and accident covers, at a less expensive charge such that poorer Nigerians within the casual sector can afford to entry these providers.
TechCabal had a dialog with Tunji Andrews, the founder and CEO of Awabah, on the complexities of constructing a monetary product and the way necessary their product is in guaranteeing that Nigerians should not locked out of the cashless society.
Are you able to please give me a quick background of the way you began and the way your private journey intersected with the creation of Awabah?
I’ve been invested within the dialog of monetary inclusion for the final 12 years. I’ve labored in and round monetary and capital markets, and have additionally finished some work with media, radio, and TV in pushing monetary inclusion. I fell in love with the idea of monetary inclusion after the CBN’s first push for cashless Lagos, and I’ve simply been within the area since then. I consider that monetary inclusion will save the African continent, and 4 years in the past, I made a decision to place my cash the place my mouth is by creating Awabah.
How did you give you the concept of Awabah?
I had been attempting to search for that straightforward product which gave leverage to casual sector employees as a result of I felt like they wanted leverage. I’ve at all times requested what using a checking account is to the native lady who has a store available in the market in Ibadan. Should you ask that query on the base, you will notice that it actually does nothing for her. She might preserve her cash in her mattress, which isn’t best, however nonetheless works. The financial institution doesn’t do a lot however take transaction prices from her.
We have been on the lookout for a construction which gave leverage to casual sector employees, and so we explored some fashions. At first, we explored lending, however we shortly realised that the construction wasn’t actually giving leverage in the way in which we thought leverage ought to be given. I used to be chatting with a buddy who talked about micro pensions, which made lots of sense to me as a result of I had finished a brief stint with a personal pension firm. I began to conduct my analysis and the remaining is historical past.
What have been some essential challenges?
At first, one problem we had was the problems of schooling and sensitisation, serving to folks perceive why they wanted these providers. We began promoting a product folks didn’t know they wanted, convincing them why they wanted life insurance coverage and why they wanted to save lots of for a pension. Fortunately, it’s simpler to persuade folks now that we’ve grown.
One other problem is regulation. The pension trade is closely regulated and simply navigating these rules whereas nonetheless attempting to innovate is extraordinarily tough. We can’t transfer as quick as we need to, as now we have to concentrate to each regulation so as to not be caught enjoying foul. Whereas rules aid you keep protected, they’ll additionally gradual you down, making you spend months doing what each different particular person might have finished in two days.
How straightforward is it presently to get folks to purchase your product?
We developed into creating one thing we now name ESS (Enterprise Assist Resolution), which is a bouquet of monetary wellness instruments. We realised it was fairly tough to promote a retirement plan to lots of people as a standalone product, and the easy purpose being that lots of people weren’t as preoccupied with their future as a lot as they’re about now. They consider the longer term will type itself out.
What we did with the ESS is locate the right combination of sorting the longer term for gig employees and different folks within the casual financial system, and doing it at a value level that’s completely tough for them to disregard. With simply ₦1500 a month, you get pension financial savings, medical insurance, life insurance coverage, and accident protection.
How do you restrict the limitations to accessing your merchandise for folks within the casual financial system?
Whereas this isn’t a simple discipline for us to navigate, as a result of we additionally should adjust to regulators, we do our greatest to make it simpler for our potential customers. For instance, rules require everybody that indicators up for micro-pensions in Nigeria to have a NIN registration. Understanding this, we make it possible for at any time when we exit for stay activations in markets particularly, now we have a NIN registration level with us.
We perceive that we’re constructing particularly for the Nigerian mass market and financially disenfranchised so we’re doing every part to make sure that we attempt to take away as many limitations as we are able to for our clients, even earlier than we strategy them.
How does Awabah make cash? You’ve constructed a product round affordability, so how do you steadiness that with being profitable as a enterprise?
We’ve been capable of do two particular issues: receives a commission on transactions and on subscriptions.
We receives a commission for each transaction that occurs on Awabah as a result of we personal the cost system. One of many causes we’re capable of drive down costs for customers is that we personal each piece of the jigsaw, and that’s how we additionally make cash. Additionally, our ESS product is a subscription-based mannequin the place employers pays a month-to-month subscription price to be able to entry a sure value level to onboard their informal employees.
We simply exited one of many worst instances in Nigeria’s financial historical past: the cashless redesign period. How did that prove for Awabah?
Personally, it was a tragic level as a result of we weren’t able to play the position we have been known as to play within the ecosystem. Within the midst of all of the chaos, we noticed key alternatives to make life straightforward for the mass market which is closely depending on money. Sadly, we couldn’t do a lot as we have been unprepared. The money shortage caught us unaware.
What are some insurance policies or rules that may do lots of good for Awabah and for the development of your product available in the market?
All of the rules that we want to have proper now are being labored on and are being finished as we communicate. The primary was to create a shared service association for an organization like ours to have the ability to play within the trade, and the second is on making a seamless cost methodology within the pension system. Should you have been to pay pensions before now, no matter how massive the corporate is, the funds occur in what we name a T+2, on the minimal. You pay to get worth into your pension financial savings account which takes two to 3 days if you happen to’re fortunate. Nevertheless, in attempting to get a extra 2023-compliant pension system, we want one thing that’s immediate, or not less than near it, and the regulators are actually creating that platform for that to occur.
What are Awabah’s plans for the subsequent 5 years?
Our ESS product is doing fairly effectively available in the market, however we preserve asking ourselves how we are able to enhance. We’re already doing collaborations to assist our clients entry mortgages. There’s now a Pencom regulation that permits folks to make use of 25% of their pension financial savings as fairness contribution in direction of a mortgage, and we’re capable of now create partnerships with banks to collaborate and assist our clients personal houses.
We’re additionally seeking to have 5 million energetic clients within the subsequent 5 years, in addition to plans of increasing into the Ghanaian market. There are additionally nonetheless states in Nigeria the place we aren’t working in but, and we plan to cowl all 36 states, satisfying each gig employee in Nigeria.
