Emerging Trend Sees the Rise of Ride-hailing Based Financial Products

The street behind Bole Medhainalem Church that leads to Hayat Hospital is filled with many small colorful restaurants. These restaurants, found on the opposite side of the church, are a haven for many workers as they offer affordable meals in the midst of Addis Ababa’s high-end neighborhood.

Among the workers who frequent these restaurants are ride-hailing drivers. While dining at these places, it’s common to hear conversations about cars, passengers, and ride-hailing platforms.

Another factor that makes the area popular with ride-hailing drivers is the shade provided by the nearby trees. These drivers frequently park their vehicles there until the next trip request rings on their phones.

In the middle of this all, there is one small makeshift shop that’s almost empty inside. Hanging outside is a message written on cardboard that reads, “Ride Credit Available Here.”

This shop, conveniently located near the customers it serves, has the whole purpose of transferring commission balances to ride-hailing drivers for profit.

Most ride-hailing platforms in Ethiopia require drivers to deposit money into co-managed banking accounts. This money, called credit, serves as a pool for commission cuts, and whenever drivers complete trips, the ride-hailing platform deducts their cut from these accounts.

If the balance in this account is zero, the ride-hailing platforms do not send jobs to the drivers until they top up. However, topping up these banking accounts is not always easy for drivers. Sometimes the credit runs out at night, or there could be no bank branches nearby. But mostly, drivers just don’t want to spend their time in long queues at banks.

It’s at these times that “ride credit” sellers come in handy. Ride credit sellers are also drivers enlisted on ride-hailing platforms, and they use an in-app feature called credit transfer to do their business. The credit transfer feature of ride-hailing driver apps allows drivers to freely transfer credit among themselves to create convenience.

Ride Credit sellers deposit large amounts of money into their commission accounts. When drivers want to add money to their commission account, the sellers transfer the credit using the driver’s app while the drivers pay mostly in cash. For every transaction the sellers make, they charge a 10pc fee. But for larger deposits, fees are set after negotiation.

This is not the only shop that sells ride credit. The business started as soon as ride-hailing platforms emerged, and many in the capital sell ride credit for profit. While these individuals operate on their own, there are also official agents who do this type of work and are paid by the bank.

Ride credit sellers are one of the earliest businesses that launched new offerings catering to the needs of the ride-hailing service sector. Besides that, ride-hailing platforms have also been collaborating with businesses like car oil sellers, gas stations, and garages in a bid to offer their drivers convenience and lower fees.

Now, as the sector is standing well on its two feet its fostering new kinds of ventures built on the sector. There is an emerging trend in which new financial services and products are being launched based on ride-hailing. These new initiatives aim to assist newcomers to the industry as well as support the estimated 50,000 drivers who are already working under these platforms.

One of these new businesses that have sprung up around ride-hailing is Amarach, a saving and credit association of ride-hailing drivers that serve their various financial needs.

Amarach was established by 50 individuals seven months ago with the primary aim of encouraging saving among drivers across all ride-hailing organizations as well as other folks. The association has different kinds of financial services and has more than 300 members.

Amarach gives out loans up to one million birr for vehicle purchases, with the requirement of saving 30 percent of the loan within nine months. The loan has a 14.5 percent interest rate and a repayment period of six years.

Through its Yelet Derash loan, Amarach aims to fill the emergency financial needs of ride drivers. It extends up to 20,000 birr credit, which is meant to cover costs for minor spare part maintenance and could be secured within two days.

Amarach also offers savings account for ride drivers to save for annual tax, earning them interest on their deposits.

Besides the ride-hailing drivers taking matters into their own hands, the ride-hailing platforms are also forming partnerships with banks and insurance providers.

Zayride, which was established in 2016 to provide modern technology and transportation solutions across Addis Ababa for both corporate and individual customers, made a deal with Abyssinia Bank to provide a taxi loan for those who want to buy a new vehicle, with a down payment of 35 percent to be imported within the next three months.

At a 16 percent interest rate, the loan covers electric cars up to 1.8 million birr and fuel cars up to 1.55 million birr.

“Currently, we have signed up 120 people who want to buy cars through this loan scheme,” Habtamu Tadese, founder and CEO of ZayRide, told Shega.

Another partnership ZayRide and a new ride-hailing entrant, Wez, have is with Awash Insurance Bank. The life insurance for drivers pays three years of driver’s revenue as compensation in the unfortunate event that the driver dies on the job. To sign up for the insurance drivers must pay an annual premium fee of 1800 birr.

The ride-hailing giant, Ride, has also partnered with Enat Bank to provide drivers with different kinds of credit services.

Enat Rayi is a loan designed for people that want to purchase new cars and has a 14 pc interest rate. To obtain the service, the driver must pay a down payment of 30% of the desired vehicle within one year. Drivers can also purchase a used car for 40% of the down payment.

The second loan is Enat Efoyta, with a maximum of 20,000 birr, which is meant for yearly tax payments, vehicle maintenance, and related costs. The driver must have an account with Enat Bank and save for three months, and pay back the bank within three months.

Additionally, Enat has a loan product called Enat Derash, a loan with a 2000 birr cap. Enat Dersah is used as an emergency fund for drivers. The loan has no interest rate, just a service fee of 2 birr a day, and the loan is paid within a year.

Past & Present 

Financial products targeted toward ride drivers already in the business are new. However, loan schemes to buy cars intended for ride-hailing services have existed before. Thousands of taxi drivers had previously advanced hundreds of millions of birr to companies like Pick Pick Taxi and Hello Taxi, which offered to import vehicles intended for taxi-hailing service. These ventures ended in disasters.

But Habtamu tells Shega the new loan offerings have a significant departure from past schemes and the loan requestors deal with the banks and the platforms do not act as middlemen.

“The down payments are deposited by the loan applicant at the bank in a closed account,” Habtamu added.