Overcoming the barriers of Low credit scores & High interest rates

Overcoming the barriers of Low credit scores & High interest rates

Rain Team

March 8, 2022

Minimal wages, a rising cost of living, and increasingly irregular work schedules force many Indians onto a financial cliff's edge. They're able to pay their expected bills but lack a buffer to handle even the smallest financial scares. Over the last few years, a large number of the Indian workforce has used payday loans to cover said scares. According to a survey by NIRA, a consumer finance company in India, 77% of India's working population had to turn to personal and payday loans to make ends meet over the last year. In 2019-20, the Reserve Bank of India (RBI) statistics showed a 28% growth in the number of Indians who take such loans.

More recently, like the current pandemic-related recession, economic downturns have only increased the dependence on such services.

A significant percentage of the workforce has faced trouble with finances. COVID-19 has worsened a growing issue with the absence of a universal credit scoring system in India since a more significant segment of the population needed more money lenders.

It is not unheard of for salaried employees to hold back on spending after the first half of the month. 

A payday loan may help matters, but there are more than a handful of loan sharks out there who are experts at ensuring the overblown interest rates seem a lot more appealing than they are. Costly loans for workers already walking the edge become spiralling burdens of repayments that result in an inability to save. Many Indians find themselves trapped in a vicious, never-ending cycle of debt, needing to take out another payday loan not too soon after paying off the last one. They find their credit score slowly declining while not having the required control over their sources of income to steady the sinking ship.

The monthly payment cycles have further empowered destructive debt cycles that force workers to repay high-interest loans when caught short on cash before month-end.

At this point, a service like Rain's Earned Wage Access (EWA) can help get things back on the right track. Rain advances earnings that workers have accrued but haven't received yet. EWA is not a loan, so there's no interest to be paid. Instead, it provides employees with instant access to their real-time earned pay, which empowers them to break out of the debt spiral by providing greater control over their finances. Using their earned wages ensures they'll have the money to make their payments any time of the month before payday.

With Rain, anyone on a payroll gets a fair chance of participating in the formal financial ecosystem. Rain advances earnings that workers have accrued but haven't received yet. The fintech start-up applies algorithms to time and attendance data supplied by the employer to accurately determine how much an employee has earned at any given point between paychecks. The firm charges a fixed fee for each pay period the service is used. 

Do these offerings make a difference to the employees they serve? 

Employees who are just starting are the most likely to go through their salary within the first half of the month before learning to manage it. However, if provided with the benefit of EWA, these new workers may be able to handle their finances a lot more productively in their early years as young adults with their money. This gives them the chance to build a healthy credit score right from the start without having to worry about delayed payments on a bill or an unexpected expense just a few days before payday. Earned Wage Access is a way for these employees to develop the confidence to use more sophisticated financial products and meet their goals increasingly.

Furthermore, EWA only provides access to money that's been rightfully earned, so there's no reason to worry about credit history or previous debt. Accessing wages while earned provides a more enriching and fulfilling work experience for employees and employers.

Organisations can offer EWA to their workforce at zero cost & no risk with Rain. Get in touch with us to learn more.