Ugandan fintech, Zofi Cash, has raised USD 1 Million in a pre-seed round from Advancly. The funding round, which is purely debt, will see Zofi Cash extend its salary advance services to cover a waiting list of 20,000 employees.
Zofi Cash was founded in October 2021 by Paul Kirungi, the CEO and Gordon Turibamwe as the CTO, a pair of Ugandans who returned to Uganda after a decade in the USA with a goal to end the 30-day pay cycle. “We partner with employers who want to extend this (salary advances) to their employees,” Paul tells CEO East Africa in a phone interview.
“We have an app where the employees make a request for an advance and then the employers approve it. Once approved, we disburse the money to the employee by Mobile Money or a bank account depending on the employee’s wishes. Employees can get up to 50% of their monthly take-home salary on any day of the month. Our product is a better option to predatory money lenders who provide payday loans due to our dynamic and low service fees that we charge.”
The demand for payroll advances is growing in Africa as people look for options to the 30-day pay cycle. According to a report by McKinsey, the payroll advances market in Africa is expected to reach approximately $12 billion by 2025. This growth is attributed to two main factors: rapid urbanization and the increasing utilization of mobile financial services. As urbanization accelerates across the continent, more individuals are migrating from rural areas to cities in search of better opportunities.
This urban workforce expansion creates a higher demand for financial services, including payroll advances. Additionally, the adoption of mobile financial services, such as mobile money platforms, has surged in Africa. These platforms provide accessible and convenient ways for individuals, particularly the unbanked and underbanked populations, to conduct financial transactions. As a result, the mobile financial services sector is well-positioned to cater to the growing demand for payroll advances.
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Zofi Cash is well-positioned to capitalize on this. The startup has partnered with over 1,500 employers with about 20,000 employees in almost two years. However, Zofi Cash has only been able to provide its services to just over 3,000 of these employees, which is 15% of the total. The startup plans to change this with its new raise. “With this new raise, we should be able to serve 50-60% of the employees that have been on our waiting list for the past six months.”
The entire $1m in this round has been raised from a single investor in Advancly. Advancly is a business-to-business financing company in six African countries that aims to bridge the gap by reimagining access to credit for MSMEs in Africa and emerging markets through capital, data, and technology. They have been active investors in Africa funding over 10 startups like Kenya’s Buy Now Pay Later (BNPL) platform Lipalater, e-commerce platform Market Force, and SME Financing platform Pezesha. Zofi Cash is their first foray into the Ugandan market.
“We believe that for people and businesses to experience progress, the flow of money needs to be innovated continually,” says Lotanna Julian, Co-Founder & CEO of Advancly. “Cash flow management is important as earning money itself. The work that Zofi Cash is doing connects to our ultimate goal of building the rail tracks for a more robust financial ecosystem that delivers prosperity for all. We are excited for the potential that this partnership can unlock.”
Paul recognizes how challenging it has been to raise funding as the funding winter ravages the world. “We have strong metrics. In a year, we have been able to make transactions worth $300,000. Raising this funding has been extremely hard. But our commitment to making sure no one has to wait for a payday to receive their salary kept on pushing us. We are confident that we can continue to deliver on our mission while expanding our reach to more people in need with the support of our partners and investors.”