Duo’s salary advance start-up a relief to low income earners

When Josphat Njui and Kenny Kinako took the podium at the global Sankalp Forum to seek for an equity investor for their salary advances start-up, the jury was awed.

Mr Njui, the chief technical officer and his partner Mr Kinako, who are directors of Shield Finance, told attendants at the third meeting at the Kenya School of Government that their clientele base had grown to 5,000 in the past eleven months thereby straining their small budget.

The jury comprising of billionaire-philanthropist Manu Chandaria, Acumen Fund’s Regional Director Duncan Onyango, Simba Corporation’s Chief Executive Adil Popat and US Aid’s Agriculture, Business and Energy Office Director Mark Carrato and nine others welcomed the duo’s project.

They directed that Shield Africa be prepared for up-scaling through mentoring and training as well as record keeping to make it investor-friendly within the next one year.

Mr Njui and Mr Kinako studied computer technology at Jomo Kenyatta University of Agriculture and Technology and an IT-cum business course at the United States International University.

While Njui first worked at Pesapal where he perfected his skills in integrating payments on an online platform, Kinako worked at Jamii Telkom and a host of tech firms that ran online commercial activities.

The two also worked with various start-ups, handling financial activities on online platforms.

LOW INCOME EMPLOYEES

Interestingly, both realised a major problem existed as low income employees were unable to access instant salary advances of between Sh3,000 to Sh5,500 as all banks and saccos charged hefty monthly fees despite the period a loanee took to pay off the loan.

The two raised seed capital from their savings of Sh400,000 and approached a local company offering to handle their salary advance portfolio for a fee.

This would see them dish out the money via a mobile phone payment platform with a demand note sent to the employer at the end of the month.

“We started off with 1,000 employees at a Nairobi based firm whose officials were excited that the bulky paperwork and processes had been taken off their shoulders.

The company had outsourced salary advances from a financially and tech-savvy company (fintech) that even had money to dish out for a small fee,” says Mr Kinako who grew up in Kitui County.

They saw their clientele rise to 2,000 but only a paltry 600 were regular borrowers enjoying a 0.25 per cent interest per day on sums dished out which totals 7.2 per cent a month.

“Unlike banks that charge application, insurance and processing fees as well as monthly interest, ours is based on days pending payment.

“Think of seeking phone credit, for a Sh250 card, you are charged 10 per cent with the repayment period being three days,” says Mr Njui.

EQUITY INVESTORS

Shield Finance told Sankalp’s 900 equity investors and entrepreneurs drawn from various parts of the world in December 2015 that two other companies offloaded their employees to them thereby creating a need for capital and they obtained Sh2 million from an angel investor.

All they needed was an employer’s commitment to repay the advances monthly and they received complete lists of employees who automatically became legible to receive the advances.

To secure their platform, the two created a mobile text-based secure platform where individual employees apply for the advances and a report is also made to the employee’s company seeking approval and after that the payment is done promptly.

“We also have a web-based platform where the various companies we are serving can log in to see how their employees are using the advances facility. We have no paperwork but an automatic service that lends money at a small flat fee,” adds Mr Kinako.

This, they said, ensured that only employees on the company’s payroll received advances that were promptly paid back in time for the next round of lending.

“We even see bank and sacco employees coming individually to seek for funds and we loan them the advances on an individual basis. But we will soon roll out a new platform for informal traders,” they said.

CREDIT SCORES

The two said that credit scores used by banks had adversely affected the working low income earners who wiped out all their savings to meet their needs.

“This is the under-banked group that we are now serving mainly in Nairobi’s and Naivasha’s hospitality, horticultural and flower industries which has seen our clientele grow to the current 5,000,” said Mr Kinako.

The two partners said that while angel investors were a good start for any business, their demand for repayments and hefty interests made it difficult for them to scale up their business leading them to seek an equity partner who will have returns when business is good but will not demand for anything when the business is down.

The fintech start-up has won several awards among them Sankalp’s 2016, DemoAfrica, Pivot East’s 2015 and SeedStars World where they got finalist awards and are currently among the top five highly rated start-ups in Africa.