The world’s population is expected to grow by 2 billion people from 7.7 billion in 2019 to 9.7 billion in 2050. The report suggested that nine countries would make up over half the projected growth of the global population, five of which are African countries – Nigeria, the Democratic Republic of Congo (DRC), Ethiopia, Tanzania and Egypt. In agreement, Cities Alliance reported that about 95 per cent of this growth will happen in low and middle-income countries globally.

Africa is largely comprised of low, lower-middle, upper-middle, and high-income economies, many of which are either fragile or suffering the impact of a conflict. The informal sector, mostly comprised of small and medium enterprises (SMEs), is a major driver of the African market, accounting for nearly a trillion dollars in yearly sales and $2.6 trillion in nominal GDP. The sector also contributes around 80 per cent of employment in the continent.

Despite a huge contribution to the economy, players in the informal sector lack the necessary infrastructure to scale up their businesses and living standards. There is a growing need for governments and policymakers to put adequate mechanisms in place to provide economic security for the informal sector as a lack of access to infrastructure and financial coverage keep hurting businesses. 

As players keep working to improve operations, economist and financial inclusion advocate Tunji Andrews developed Awabah, a solution to provide these players with long term financial security. Awabah is a Nigerian-based digital pension platform for self-employed people. Starting with Nigeria, it aims to create a financial ecosystem around Africa’s informal economy.

“When you work a nine-to-five, you have access to several perks; HMO, loans, or mortgage because you have a salary. These things are generally available to you because you have a salary-paying job. People in the informal sector cannot access these perks, and sometimes they earn more than people who work in corporate organisations. Unfortunately, nobody has moved to create this ecosystem around them. And that’s what we are doing with Awabah; creating that robust ecosystem around the informal sector, starting with pensions, then insurance, loans, deposits for mortgages, etcetera. The horizon is enormous,” Andrews said.

Awabah vendors meeting October 2021

Since it commenced operations in January 2021, Awabah already has its footprints in Lagos State, Kwara State and Oyo State. The fintech is looking to raise funding for expansion into five other Nigerian states including, Edo, Ekiti, Kano, Kaduna and Abuja in the next six months. “This will require a lot of heavy lifting because we have to interface with people. The average Nigerian will not trust you with their money. So, we have to educate and sensitize them. We have to make them understand why this is necessary. And provide short term value as they plan for the future,” Andrews said.

Accounting for 80.8 per cent of jobs, the informal sector is the main source of employment and the backbone of economic activity in sub-Saharan Africa. Yet poverty is spreading throughout the region, especially in Nigeria’s rural communities. Last year, the National Bureau of Statistics (NBS) reported that in 2020 40 per cent (83 million) of Nigerians live in poverty. The bureau projected that the number of poor people in Nigeria would increase to 45 per cent (90 million) of its population by 2022. Awabah is working to reduce poverty in the country.

“Many Nigerians are poor because their parents were poor, and their environment makes it difficult for them to advance in life. So, we need to create infrastructure around these people,” Andrews noted. “For instance, if I live in a community, where there is no power, the only source of money is either to farm or fish or to ride a commercial motorcycle, there’s very little I can do to scale my life if you think about it. I can work hard and fish more, but my customers will be people in my community. I can ride ‘Okada’ for 24 hours, it’s the same thing. It means I will be poor whether or not I work hard. What we’re trying to do is to create multiplier effects for many of these people who are in the rural structures of Nigeria so that we can fight long term poverty, but at the same time provide for them today,” Andrews explained.

Infrastructure and legislation are two major issues businesses confront when starting in different parts of Africa. Most African countries lack the required infrastructure to aid the soft-landing of new businesses, forcing entrepreneurs to work extra hard to get their ideas off the ground. Corruption, embezzlement, insecurity, conflicts and nepotism are some factors that have made it difficult to do business within the region, thereby hindering growth. 

According to Andrews, empathy is the core of Africa’s fundamental challenges. “Our biggest challenge is that we are trying to build simple infrastructure and having to start from scratch because there is nothing to build on. Our government seems to lack empathy for the poor,” he said, adding that the Nigerian government is building its systems and infrastructures around people who live in cities and not those in rural communities. 

“If you do not have empathy for those who do not have access to services that everyone else has, you won’t understand why they would refuse to buy health insurance, even though it is critical to their life,” Andrews said. He encouraged the younger generation to think about retirement planning early. “Every old person was once young. They thought old age was a long way off. Then it happens, and you realise this is it. You don’t want to be that person who works into their 70s because you have nothing to take care of yourself.”

Elsewhere on Ventures

Triangle arrow