The Nigerian tech ecosystem is undoubtedly one of the most vibrant in Africa. It is also the most attractive for many startup founders who are constantly innovating and creating solutions while taking advantage of the opportunities that abound.
In view of the innovations and disruptions, it is important not to forget the one tech startup paving the way for financial inclusion among the informal sector in Nigeria in the area of micro-pensions. That tech startup is Awabah.
We will focus on the inspiration behind the company, the founder, the pensions landscape in Nigeria, and Awabah’s business model and prospects.
How Awabah came about
Awabah is a digital micro-pension platform for Africa’s workforce, creating a sustainable future for every African. The company is regulated by the National Pension Commission. The company commenced operations in 2020, founded by Tunji Andrews to improve financial inclusion in the informal sector in Nigeria, which accounts for 93% of all employment in Nigeria. During the lockdown and seeing how vulnerable a lot of people were, Awabah saw it as an opportunity to introduce micro-pensions as a key financial tool to improve the lives of Nigerians and create sustainability. This is based on the premise that the entire informal sector in Africa lives on a day-to-day basis without structure and sustainability.
The vision and the direction of the organization have been the same. It’s tied to creating a sustainable future for all and as social security for informal sector workers. Developing/ Third World countries have a large informal sector which implies that there is a large adult and aged population that are poor and don’t have any social security. In India, for instance, there’s a huge population of aged people in poverty who have not saved much and hence have nothing to fall back on. Nigeria is not left out.
Founders
Tunji Andrews (Founder/ CEO) – Tunji graduated as an Economist from Lagos State University and is a Financial inclusion advocate and Creative entrepreneur. He has worked in various organizations, including the Capital market as a Junior analyst explaining financial services to customers. A job he succeeded at due to his passion for finance and background in Economics. He later worked on Radio and TV, which led to a 10-year stint speaking about financial terms, sometimes as a guest speaker, host or news anchor. He also had a stint with the National Bureau of Statistics working closely with the Statistician-General at the time.
Oluwabukolami Ajisebiyawo (Co-founder) – Bukolami is a graduate of the University of Ibadan and is a full-stack software engineer. She is experienced in developing a wide range of APIs and user-friendly web applications, frameworks and technologies for frontend and backend development.
Pensions Industry
Micro Pension Plan refers to an arrangement under the Contributory Pension Scheme (CPS) that allows the self-employed persons and persons working in organizations with less than three (3) employees, to make financial contributions towards the provision of pension at their retirement or incapacitation.
There are no specific micro-pension licensed operators in Nigeria; although they exist in countries like Ghana, which practices a three-tier pension system. In Nigeria, it is a one-size-fits-all system where the available licensing gives the full spectrum coverage, to reach both formal and informal markets, which requires more resources, not only in capital base but by having a physical branch in every federation.
Business Model
Pensions fund administration is the basis of what Awabah does (while not being a Pension Fund administrator themselves), they sell a sustainable future by partnering with traditional Pension fund administrators. The onboarding of new enrollees is managed by Awabah, having observed the operations of companies like Pinbox, a Singapore-based tech platform committed exclusively to digitizing micro-pension inclusion in Asia, Africa, Latin America, and the Caribbean.
The company makes its profit from servicing Pension savers while leaving the investment and administration of the saved funds to the Pension Fund Administrators. For the customers, however, returns are generated by investing in government securities (federal and state government bonds). There are other investments in the stock exchange, corporate bonds, real estate, private equity, infrastructure funds, and the accumulated capital which can be paid out in a lump sum or as an annuity on the agreed-upon withdrawal date. Uniquely, Micro-Pension enrollees have the option to withdraw 40% of their monies after three months.
Micro Pensions help a large percentage of adult Nigerians who are not on the Contributory Pension Scheme, are self-employed or working in organizations with less than 3 employees (MSMEs). Awabah currently has over 5000 individuals on its platform.
