Earned Wage Access

Earned Wage Access as the financial solution for employees and companies

East Ventures’ Thesis on Earned Wage Access (EWA) platform

July 12, 2022

The fintech sector has grown exponentially in Indonesia as it could fill the financial gap for millions of people. However, other issues appeared as some people were trapped by illegal fintech lending and lack of financial literacy, making it difficult to manage their wealth and cash flow. 

According to a survey conducted by UNICEF, which surveyed over 12,000 families – across 34 provinces and 247 districts, between October and December 2020 period, the poverty rate among all households surveyed increased, to 12.3% from 8.1% in 2019. It represents a significant shift towards a poorer society. Many more people are now living in the bottom 40% of the expenditure distribution (earning up to IDR 800,000 per month), and there are fewer households in the top 60% of the distribution (earning more than IDR 803,000 per month) compared with 2019 levels. 

The survey also showed that half of all households (51.5%) had no savings upon which to fall back on. More than one-quarter (27.3%) were pawning possessions to survive. A quarter (25.3%) were borrowing money informally from family or friends. Of the households to have racked up personal debt, 40% were failing to make regular payments. 

To address the issue, helping employees in providing their wages early or so-called Earned Wage Access (EWA), could be the solution, especially for employees who can withdraw some of their salaries by the number of days they have already worked. Accessing early wages will help employees cover most of their necessities and reduce relying on other methods of illegal loans at the same time. 

The EWA method is not a new thing for companies and employees. Some companies have implemented cash loans for employees. However, this traditional method comes from the company’s cash flow, which might be challenging for companies with a tight cash flow. Meanwhile, the cash from the EWA digital platform comes from the digital platform itself or another third party, so it will not decrease the company’s cash flow. 

The EWA method also has a little risk, compared to Peer to Peer (P2P) lending. If P2P lending has a potential NPL (Non-Performing Loans) or late repayment when the borrowers could not repay on the specified date. Meanwhile, the EWA platform has a short period of payment, and the company will pay the debt, which is cut from the employee’s salary. 

Utilizing the EWA method will also help the employees’ wellness cover their necessities and help them reduce their reliance on other forms of illegal loans. 

According to a Central Statistics Agency (BPS) report, there were around 62.56 million workers in Indonesia in August 2021.

We estimated that the potential market will reach US$ 13 billion by 2024, considering the number of workers and minimum wage will keep rising over the year, and Indonesia is entering a golden era of productivity. Therefore, we have a strong belief that EWA platforms will bring a significant impact for the Indonesian market, especially supporting financing for employees and becoming a company’s solution too. 


By Sidharta Allen Wijaya, Investment Associate at East Ventures (Growth Fund)