After working in Africa’s microfinance space for seven years, including at Botswana’s Letshego, Brian Dempsey took a break in 2020 to build Power Financial Wellness, operating out of Kenya.
Dempsey said the launch of Power was informed by the trends he noticed in the micro-lending space, and experience garnered from his stint in the micro-finance sector.
“During my time at the micro-finance institutions I noticed that close to 65% of workers that banked with us would spend all of their money in the first five days of the month. And then they go on to access expensive microcredit [from loan apps], which left them struggling from a financial health perspective,” said Dempsey, Power co-founder and CEO.
“This is what informed the launch of Power. We focus on helping workers access affordable and appropriate financial services,” he said.
Power is now scaling in Kenya, and making an entry in Zambia, backed by $3 million seed funding it has secured in a round led by DOB Equity with participation from Bolt by QED Investors, Quona Capital, Zephyr Acorn and Norrsken Accelerator.
The startup issues partner employees access to short and long-term loans, investment opportunities and insurance products. Unlike other micro lenders who rely on credit reference bureaus to make lending decisions, it only lends to employees and contractors (gig workers) of companies they have on-boarded on their platform, lowering the risk of defaults, and ensuring that borrowers access funds that they can pay back.
The startup has so far on-boarded 75 companies in Kenya, giving it access to more than 40,000 workers, out of which it’s been able to serve 15%.
“We integrate to their payment or payroll system allowing their workforce to download the Power app. We then conduct digital identity checks, and open up our four key services to them,” said Dempsey, who co-founded Power with Chandra Singh in 2020.
“Once we connect into a company, we already know how much the individuals are earning, how long they’ve worked there. We know whether they’re full-time, part-time contractors or gig workers. We connect into the credit bureau in real time to pull information on other facilities they might have in the market. And we use all that information to then provide a unique amount, interest rate and loan tenure for workers,” he said.
Power gives employees the ability to access a percent of their earnings in advance, and long-term loans on its balance sheet, based on their earnings, for 2-3% interest a month. Its platform also allows HR to access, approve or reject employee loan requests.
Individuals are also able to purchase various insurance products, and make repayments over an extended period, which attracts the same interest, giving them access to packages by partner companies that require lump-sum payments.
Besides, those signing up for the investment service are introduced to money-market and pension funds, to which a pre-determined amount from their salaries is invested.
“Basically, it is a deduction at source meaning that everything that we offer to the workers gets deducted from their earnings before it hits their current account,” he said.
The company has so far disbursed more than $1.5 million in loans since launch. It plans to reach 250 companies in Kenya.
Power has also expanded to Zambia, where it plans to be a technology partner instead of an active lender, and has signed a deal with a southern African bank to kick-start its latest strategy.
“In southern Africa, we have a bank partnership in Zambia, Malawi, Mozambique, Botswana and Zimbabwe. We’re starting in Zambia. And what we are trying to look for in our partners is a typical bank that is banking a lot of companies, corporates or SMEs but not really banking a lot of retail consumers but have strategic intent to expand their offering and grow their loan book and deposit-based savings,” he said.
He says they plan to continue partnering with banks leveraging the technology to allow them to offer a new range of services to workers, and completely disrupt the market. Power is also eyeing expansion to at least 10 markets in Africa over the next three years.