How can banks participate in fulfilling the needs of Africa’s rising gig economy?

By Oluwasanmi Akinmusire 

Informal employment represents 80-90% of the total workforce in most African countries, forming the bulk of the workforce. Gig workers are a growing segment of the informal economy, driven by an increase in innovation and the rise in the use of digital platforms that serve as the primary channel through which gig workers find work.

Ride-hailing, distribution services, transportation, delivery, food services and medical services constitute some of the industries that within the last five years have experienced digital transformation and proliferation powered by digital platforms. As these platforms grow and become entrenched in our daily lives, so does the population of gig workers.  This is a trend that is bound to keep growing over the next decade.

While the gig economy is growing, it remains financially and socially vulnerable since access to financial security in the form of bank loans and other financial services is still fairly low.  This segment of the workforce is still severely underserved by traditional financial institutions. Due to the nature of gig-based work, earnings are seldom structured or consistent. This fluctuation of income makes it difficult – often impossible – for individuals to gain access to credit for both personal and business needs.

From an economic perspective, these hurdles to securing business funding restrict the ability to upscale businesses and increase contributions to the economy, which in turn negatively affects job-creation potential. From an individual perspective, poor access to finance severely impedes progress when it comes to improving quality of life and societal advancement. This is especially problematic as a large portion of gig workers in Africa are low-income earners.

In addition to challenges in accessing loans, the credit models of traditional financial services are also not suitable for the gig economy. Contracts are generally inflexible, have a high-interest rate (as gig workers are seen as “high risk”), include unmanageable repayment terms and other demands that do not cater to the unstructured nature of gig-based income earnings. In fact, access to “bad credit” lines, such as those with harsh penalties, is arguably more detrimental to gig workers than no access to finance at all.

Financial services are generally structured around strict risk-based models, and traditional institutions are therefore reluctant to offer a level of flexibility to suit the gig economy. This necessitated the emergence of ImaliPay, a niche financial service provider that caters to this underserved market, mainly in the form of a digital platform that leverages AI and big data to fulfil many specific needs of gig workers. ImaliPay was birthed to offer tailored and flexible solutions to address this unique circumstance of gig workers. The key features of our platform include:

  • Mobile phone-based services that allow easy and convenient access to the platforms, regardless of location
  • Access to credit, with low interest and service charges
  • Flexible options to suit the needs of different gig income structures
  • Unconventional “loans” that are not restricted to cash only – workers can apply for an “in-kind” loans, such as tools or equipment needed for trade, or even fuel for work-related travel
  • Incentive models that encourage workers to save money. This includes setting financial goals and tracking progress
  • The ability for platform users to build their credit score based on their financial behaviour (such as paying back on time and saving) in the same way that traditional financial institutes operate

Traditional banks and financial institutions are not left out of the fray. On the contrary, their participation in this market strengthens the position and potential of financial inclusion within the gig economy. Collaboration allows financial institutions to benefit from access to a new client segment, traditionally difficult to bank due to associated higher risk profiles. ImaliPay offers financial institutions the ability to lend to a new audience (with reduced risk) and carry out deposit mobilisation (savings) for the same market segment, ultimately offering an avenue to provide financial services to bank Africa’s gig economy.

(Oluwasanmi Akinmusire is the co-founder of ImaliPay, an embedded finance platform that provides and offers tailored financial products that promote the inclusion of gig economy platforms and workers across Africa).


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