Earned Wage Access — An alternative to Expensive Payday Loans.

mkobobank
5 min readSep 16, 2022

Deji is a father of 2 and works for an agency as a customer service supervisor.

He woke up one morning to the news that his house rent, which will be due by month’s end, has been increased by 25%. Although he had saved for the amount he paid last year, the news spoiled his mood and affected his morale for the rest of the day. While at work, he was distracted and could not focus on his task for the day. It is very likely that his effectiveness and efficiency will continue to drop in the coming days.

Deji has the option of taking a personal loan or salary advance, but this will impact his savings and investment plans causing more financial stress due to the accrued interest he will have to pay. Another option is getting access to his earned salary before payday without paying interest, popularly referred to as earned wage access (EWA).

What is Earned Wage Access?

In simple terms, Earned Wage Access (EWA) is on-demand access to a portion of your accrued salary ahead of payday. What differentiates it from expensive payday loans or salary advance is the fact that there is no interest to pay or penalties for late repayment. Repayment is debited when your salary is credited to your account. The only cost you will incur for using the service is the transaction processing cost, which is usually a flat fee.

The benefits of EWA for a salary earner are enormous.

Let’s take Deji’s case as an example. He has an unexpected bill to pay. Aside from house rent, other emergencies such as medical bills, house repairs, and family emergencies can also come up unexpectedly. With earned wage access, Deji can cater for these unplanned or emergency expenses with little or no pressure.

One major benefit of earned wage access for an employee is the relief and freedom it gives you from paying high interest when you access funds for unexpected expenses.

This interest eats into your income that could have been allocated to savings or other needs. This can trap you into accessing another loan, and this in turn increases your financial stress. You are now caught in what is referred to as a debt cycle.

How does Earned Wage Access work?

Let’s assume Deji earns N80,000 net salary monthly and has already worked for 10 days, his accrued salary is N40,000, i.e. 50% of N80,000. Unfortunately for Deji, a family emergency came up and he needs money quickly to solve this emergency. Through the EWA, Deji will be able to access up to 50% of this accrued salary i.e. N20,000 of the N40,000.

Although Deji has already accessed N20,000 of his accrued salary, now assume on day 15, Deji experiences another emergency with the roof in his bedroom leaking. He needs another N10,000 to sort out this issue. Deji has already accrued N60,000 of his salary, so it means he can now access 50% of it, which is N30,000, but since he has already accessed N20,000, it means he has N10,000 available to access.

On payday, the N20,000 and N10,000 accessed by Deji will be deducted from his salary without any interest, with the balance of N50,000 paid to Deji. Deji has managed to resolve all his financial emergencies without incurring expensive interest of up to 30%, which is usually charged for payday loans.

The only cost to Deji is a one-off low withdrawal fee, usually between N500 and N1000 depending on the amount withdrawn.

With Earned Wage Access, Deji has easy access to his already earned and accrued salary at any time. This has enabled Deji to reduce the financial stress of incurring costly overdraft fees usually associated with most loan sharks, which also saves him from the trap of debt cycles.

Benefits of EWA for Salary Earners

Let’s list some of the benefits of earned wage access for salary earners illustrated in Deji’s story.

  • It reduces employees’ financial stress by giving them access to their money when they need it most.
  • EWA helps salary earners break from the trap of debt cycles as they will not need to resort to payday lenders and other forms of financing that charge high-interest rates.
  • Financial stability provided by EWA improves the total well-being of employees, which covers emotional and physical well-being.

Benefits of EWA for Businesses

The unfortunate reality is that many salary earners live from paycheck to paycheck. They experience severe cash flow limitations, largely driven by a gap between unexpected daily spending and regular pay cycles. Earned wage access relieves some of the stress of living paycheck to paycheck.

Providing on-demand wage access to your employees will improve your employee’s financial well-being. Studies and surveys have shown that improved employee financial wellbeing leads to

  • Increase productivity — financially stable employees are five times less likely to lose concentration while at work.
  • Increased employee satisfaction — when employees are worried about money, it affects their moods at work and interactions with coworkers, clients, and even you as their employer.
  • Higher employee retention — employees who are financially secure are less inclined to look for a second job or apply for a new one.
  • Reduces absenteeism — With EWA, companies have reported a 74% reduction in absenteeism
  • Save more money — save money by reducing the need to hire and train new employees

Osemeka, a manager at HYT consulting, an Hr consulting firm, said that their employees’ productivity skyrocketed: “the introduction of this service has had a significant impact on the productivity of my employees. It has helped them to bridge the financial gap”

Earned Wage Access by Mkobobank

Mkobo.bank has designed an earned wage access solution called Earlypay to help boost the financial wellbeing of low-income workers in Africa. With Earlypay, salary earners can access up to 50% of their earned wages before payday at ZERO interest anytime.

This means that employees can access their accrued salary anytime they need emergency funds to cater for personal needs e.g bills payment, emergency medical or family expenses, transport fares, home repairs, etc.

If improving your financial wellness or that of your employees is something you’re interested in, click here to get in touch to get early access to EarlyPay.

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mkobobank

Mkobobank — digital bank for salary earners, self employed that gives you access to up to 50% of your earned salary before Payday at ZERO interest