One of the many buzzwords associated with the rise of the pandemic is ‘gig economy’. It has many definitions, but in essence it encompasses any work that is not formal, and not long-term (full or part time) employment. In this broad definition, freelancers, seasonal workers (i.e. farmers), independent contractors via digital platforms (i.e. Uber partner drivers) make up the biggest bulk of such employment in Egypt.
As much as they were faced by a myriad of challenges over the past year, the challenges faced by gig workers way predates the pandemic. Though official stats are lacking on the size of the gig economy in Egypt, most experts estimate it between 40 and 50 percent of Egypt’s total economy.
In Egypt – where access to bank services is notoriously low due to its traditional attachment to formal employment or existing assets – gig workers have suffered years of financial exclusion from formal banking services with all the services and qualities that entails.
Gig workers left out
“There are regulatory constraints regarding opening bank accounts, which used to be hectic and requires lots of documents including proof of income (HR Letter or occupation mentioned in the national ID for working professionals, or a commercial register for business owners for instance),” explains Hassan Ali, founder of Teknolojia, an Egyptian consulting and training provider in FinTech and Innovation, and FinTech mentor-in-residence at the AUC Venture Lab. “The Central Bank of Egypt (CBE) have tried to ease that a bit with a new set of rules for account opening that was issued last month.”
The CBE had decided last month to ‘ease the process of opening bank accounts’ with a series of decisions, including the possibility of opening a bank account only with the national ID number and enabling anyone to open a bank account at the age of 16.
However, more may be needed to be done.
“Gig workers see no incentive whatsoever in embracing the formal ecosystem; the message that’s being transmitted to them “come join the formal financial ecosystem and pay taxes” and that needs a lot of change in the way the government promotes the idea of financial inclusion, and also needs a set of incentives for gig workers to do so (Like medical & social insurance, temp tax breaks, etc.),” elaborates Ali.
FinTech’s helping hand
As such, financial inclusion for most Egyptians remains a distant goal. However with Egypt’s FinTech ecosystem slowly maturing, many startups have sprung up addressing this gap, one of which is Dayra, a startup founded in early 2020 by Omar Ekram, a self-taught developer and coder, with the aim being providing virtual banking services to Egyptian gig workers to eliminate the need for cash transactions and third-party fees.
“Dayra is an Egypt-based FinTech company empowering Egyptian businesses of all sizes to offer financial services such as early access to income and access to loans to their unbanked workers and customers via (Application Programming Interface) API integration,” explains Hana Zaghloul, commercial director at Dayra, the startup which astoundingly grew by 50 percent month over month since its launch.
Dayra offers loans of up to $2500 to its customers that are periodically deductible from future earnings, which it manages through its virtual banking services.
“We also provide productive loans, Capital expenditure (CAPEX) financing, and aim to launch our prepaid cards and virtual accounts soon.”
What brought Dayra into existence is addressing the ‘scarcity of available alternatives to access financial services’ in Egypt, but as most finance and economy experts in Egypt would tell you, the barriers to financial inclusion aren’t just institutional or regulatory, but also cultural.
“Many barriers to financial inclusion are psychological and historical; many of these unbanked individuals have never felt addressed by banks. Therefore some have been using informal financial services for years, and others might just be in need of financial literacy to take that step,” explains Zaghloul.
It’s not just access
The services offered by Dayra and other Fintech startups in Egypt can be argued to exceed mere ‘access’ to financial services, represented in the loaning schemes of Dayra, reaffirming notions introduced in recent research arguing that financial inclusion is indeed about more than just that.
“Access is a necessary, but not a sufficient condition to achieve financial inclusion in a substantive sense. [Financial] autonomy and affordances are two crucial factors to be included in the discourse on financial inclusion,” reads a 2019 joint paper by Aarhus University and Microsoft Research India.