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Using Payroll Technology as a Means for African Workers to Access Credit



It’s a fairly straightforward process to access consumer credit in developed regions like North America or Europe. Credit agencies, banks and financial players easily interact and share information and data which credit providers can then leverage to make informed decisions.

On the African continent, however, it’s a much more complex undertaking.

“Although there are credit bureaus and there are credit referencing agencies [on the continent], information is extremely limited. It’s often out of date, and quite frankly, it doesn’t tally and correlate to what’s really happening,” Chidozie Okonkwo, co-founder of Bento, told PYMNTS in an interview, adding that Africa’s “prepaid economy” makes it challenging to find data on consumers’ payment patterns or determine their creditworthiness.

And that’s the challenge Bento is trying to overcome with its payroll technology, first by helping African businesses shift from the mundane and manual payroll and human resource management (HRM) process to faster and more efficient digital and cloud-based solutions.

“Today, about 98% of African businesses are using spreadsheets, checks [and] bank transfers to pay salaries,” Okonkwo said of the highly fragmented and inefficient process that its core payroll product, Pay by Bento, is helping to remedy by enabling businesses to pay salaries, taxes, pensions, and make all statutory remittances “with one click.”

Leveraging Strategic Vantage Point

Solving that first hurdle of automating the payroll process has put Bento in a strategic position where it is plugged into all the banks, pension funds and tax systems, giving the firm visibility and access to data on thousands of employees.

Those employees, Okonkwo said, are “starved of credit solutions” to cover basic needs like rent and paying for children’s school fees, and the FinTech is using its vantage point as a payroll solution provider to help meet that need.

The company has also teamed up with Tarya, one of Israel’s largest peer-to-peer (P2P) lending firms, to build a proprietary credit engine that pulls data from different third-party sources, allowing Bento to offer loans at more attractive rates than traditional retail lenders, as well as disburse loans in minutes instead of days.

“When you take the payroll data we have and some of the other things we’re doing around machine learning with our partner in Israel, we’re able to more accurately predict someone’s risk profile, and therefore offer them loans at much better rates,” he explained.

Okonkwo said it’s been necessary to educate the companies it works with and their employees on the importance of insurance, and the firm is starting to make headway in that area as people grasp the ability to use it as a tool to help improve their quality of life.

He said Bento is able to offer loans at cheaper rates than its competitors partly by bundling loan protection at a small fee, which boosts lenders’ willingness to offer lower rates given the guarantee the insurance provides.

To date, Bento has processed over $40 million in payroll for over 700 active Nigerian businesses since launching in 2019, and has plans to expand to other regions across the continent.

He added that looking at the roughly 44 million small and medium-sized enterprises (SMEs) on the continent — per data from the International Finance Corporation (IFC) — Bento and its competitors combined have yet to attain even 1% market penetration, making the massive labor market a “blue ocean” bristling with opportunities for growth.

“For us, it’s about how we solve that initial problem of payroll, which is a major pain point, and then we can leverage that to kind of unlock the much bigger pie,” he said.

Building an Ecosystem  

Beyond that, the payroll tech firm will be looking to develop its other core HRM solutions product, People by Bento, which includes a proprietary solution for shift management that helps businesses monitor shift workers through facial recognition — “via tablets mounted on walls” — instead of the traditional way of clocking or punching a card which can be gamed or manipulated.

He said they’ve seen massive uptake from several quick service restaurants, fast-moving consumer goods (FMCG) companies, warehouses, and security companies, who are using it to tabulate their workers’ attendance and salaries.

Bento relies on key partnerships to operate in various verticals and as Okonkwo said, “we’’e humble enough to realize that we will never be in the best position to come up with the actuarial tables for insurance or figure out the best way to manage a loan book.”

He said it boils down to building an ecosystem “around the employer and the employee,” which allows partners to deploy their capital and expertise in a far more efficient, less fragmented way.

While doing that, Bento will continue to pursue its expansion plans across the region, tailoring its solutions to the different local markets. “We see a more holistic problem across the continent, and we think we’re in the best position to solve it,” he said.




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