Abhi, a Karachi-based salary advance platform, has raised $2 million in a seed round, the company announced in a statement.
Founded by Omair Ansari and Ali Ladhubhai earlier this year, the duo has managed to raise equity in a seed round led by Vostok Emerging Finance (VEF) with Village Global, Sarmayacar, i2i Ventures, Zayn Capital, and Portman Wills.
Dave Nangle, Partner at VEF said, “This investment allows VEF to continue on a mission of improving the financial well-being of average Pakistanis. The traditional pay cycle has tied up employees’ earned income for as long as we can remember, forcing workers to turn to overdrafts, payday loans, and other punishing products. We hear companies talk about ‘Digital Transformation’ all the time; modernizing the pay cycle is the most fundamental transformation a company can make to its relationship with employees. It is a great scale product, a win for all involved and the cornerstone for a much broader employee financial wellness play.”
Living paycheck to paycheck and struggling to meet expenses towards the end of the month is not rare. To facilitate such employees, Abhi has partnered with 20 companies to enable employees to withdraw their accrued wages any time they want through the webpage or mobile app.
Before launching publicly, Abhi signed MOUs with 20 companies and is currently conducting a three-month pilot. The companies taking part in the pilot come from sectors like insurance, steel manufacturing, pharmaceutical, textile and retail, allowing Abhi to validate the product as well as gather information for future growth metrics. The exercise is centered around gaining insights on the pain points of employees, their lending needs and what situations triggered that need.
The financing facility is Shariah Compliant and the company charges a transactional fee to employees but will be free for employers. Employees will pay back the advances through a deduction in their monthly salary prior to it being transferred to the employee salary account. Moreover, the advances will be funded by Abhi and will not make a difference to the employer’s balance sheet.
Abhi is the recent entrant in the employee salary financing space and joins the ranks of Finja, another fintech company that was launched in 2016. Similar to Abhi, Finja provides salary advances to employees of the companies that use Finja’s payroll processing application against a service charge. Finja recently raised $10.15 million in its Series A financing round and one of its investors include Habib Bank Limited that invested $1.15 million in the company.
Co-founder Ansari, who previously advised and invested in fintech solutions in emerging & frontier markets, noted, “We believe financial wellness and access to credit are basic human rights, which we aim to bring to all our customers. Our goal is to digitize consumer credit, address pain points in the manual payments process and be there when consumers need us most. Your wage is your right, and we want you to have access to it ABHI (“right now” in Urdu).”
It is also aimed at showing employers that Abhi does not disrupt the cash flow or business process and adds no cost to HR or Accounts. Instead, the companies benefit from a more motivated workforce leading to increased productivity, satisfaction, and retention.
Co-founder Ali Ladhubhai, who previously founded Pakistani fintech startup KarloCompare and led business development at Foree noted, “Less than 2 million people in Pakistan have access to formal credit. We saw the need for an early wage access product that could allow them to access alternate digital finance together with a knowledge center to educate them about using personal finance responsibly and to their benefit.” With an eye already on future innovations, Ladhubhai added, “This is just the beginning for us. We have plans to provide a range of digital financial services to allow for customers to conduct all financial transactions from a single financial app.”
Sarmayacar’s General Partner, Dr. Bernhard Klemen added: “The annual salaries of the urban employed labor force across 100,000 public and private companies in Pakistan is estimated to be over $65 billion yet official reports suggest that formal lending channels account for credit of just over $3 billion only, with millions of Pakistanis accessing informal channels at egregious rates. Sarmayacar believes in Abhi’s vision and is delighted to back Omair and Ali in transforming the way Pakistanis access credit and over time build the region’s leading finance wellness platform.”
Team Abhi is now gearing up to join the Summer cycle of Y-Combinator, an American seed funding accelerator that aims to equip startups with the skills and knowledge to help their ideas grow. They join the ranks of alumni companies from Pakistan like SafePay, Markhor and Byte, and the global alumni companies that include Airbnb, Dropbox, Reddit, and Coinbase.