Innovative vehicle finance for Uber drivers

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Cape Town - An innovative vehicle finance solution from Uber in partnership with WesBank was a recent finalist in the Global Banking Administration Institution (BAI) Banking Innovation Awards.

It was featured in the Societal and Community Impact category for creating a vehicle solutions programme that empowers entrepreneurs.

Last year November WesBank, partnered with Uber to launch what it regards as a world-first leasing finance solution that aims to create thousands of work opportunities for entrepreneurs in South Africa.

WesBank worked with Uber and the Vumela Fund to create a unique product that assists Uber driver-partners who previously worked for transport operators and as such have a limited credit history and, therefore no means to obtain finance. Through the Vehicle Solutions Programme, they have the opportunity to lease a car and become their own boss.

Vumela was established in 2009 by FNB Business Banking and Edge Growth to create an innovative model that filled the gaps in the current SME funding and support landscape.

To date, the Vehicle Solutions Programme has changed the lives of 600 entrepreneurs. Through the Vehicle Solutions Programme they are given access to a car of their choice and the opportunity to own and grow their transport enterprise, as an Uber driver-partner.

The project has been headed up by John Loxton, General Manager of WesBank’s Fleet Management and Leasing division.

Loxton told Fin24 on Tuesday that they tried to find a solution to the challenge of working in a country where most of the Uber driver-partners don't have the means to get funding. Some might even have bad credit records and no credit record at all.

Uber provided the perfect platform to create qualifying criteria for the Uber driver-partners to graduate to the leasing programme.

"We worked closely with Uber on the model from day one. We have a set of criteria for driver-partners to qualify and to improve their income potential," said Loxton. “Uber driver-partners have improved their average income by about 50% through our Vehicle Leasing Programme.”

WesBank designed the product around a transaction, the more active the driver-partner the higher the earning potential.

"They engaged with us to look for a solution and we came up with the idea of looking at the funding model slightly differently, namely not as a finance transaction, but as an asset management transaction," explained Loxton.

"When you do funding, you give someone a loan in order for them to buy a vehicle and the vehicle becomes the surety. But as an asset management transaction, you just need a mechanism to collect rent on the vehicle - as opposed to a funding transaction."

He said initially they had to wait as Uber driver-partners needed to achieve the qualifying criteria before they could become a part of the programme. To qualify for the Vehicle Solutions Programme, Uber driver-partners need to hold a relevant operating license and have an existing and active Uber profile with at least 500 trips completed within three months. The Uber partner-driver rating also needs to be 4.60 or higher to qualify.

The Uber WesBank Vehicle Solutions Programme has been designed to give individuals the opportunity to build a credit record. Uber driver-partners with poor credit or no credit history are still able to apply for the Uber WesBank Vehicle Solutions Programme, provided they meet the eligibility criteria. An ITC credit check will be undertaken to assess the extent of each applicant’s bad debt prior to approval. Before the Uber driver-partners submit their application form on the Uber marketplace, one of the terms is that they give consent for WesBank to make an enquiry against their credit record with the credit bureaus.

Since about two months ago, however, there has been a significant uptake. WesBank has had more than 2 900 applications in relation to this special product and so far there are more than 600 vehicles operating on the platform.

"This is a way for us to contribute to enterprise development in South Africa. By the end of January we plan to have about 1 000 new business owners on the road. The efforts we put in have been quite successful from a societal perspective and we look forward to changing the lives of more ambitious Uber driver-partners."

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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