Mastercard's fintech fast tracks financial inclusion in Africa

As the digital economy continues to grow, increasingly relevant financial solutions emerge. Consumers can access services that make their lives simpler, and businesses can run more agile and efficient operations with enhanced potential. Governments can reach more citizens. Long-term prosperity comes into vision for more and more people. It is why financial inclusion is so critical. Because financial inclusion is the first step to financial security. 

Mastercard is innovating for impact in financial and digital inclusion. In 2020, it doubled down on its financial inclusion commitment to connect 1-billion individuals and 50-million micro and small merchants to the digital economy by 2025 — with a direct focus on 25-million women entrepreneurs. 

While this is a global goal, there is a vast amount of work to be done in Africa, because there's persistent and widespread inequality and exclusion. Mastercard has a responsibility to continually think about how it can find different and more innovative ways to address these challenges. 

Innovation unlocks digital inclusion

Local innovation is critical in driving inclusion. As a global technology company, Mastercard cannot simply pull things off the shelf from its product set in the US or Europe and expect it to work in Africa. This is especially true in an environment where many people may still have limited access to basic technology and financial services. To create products and services that truly solve the local pain points for communities in Africa, Mastercard must think carefully about the technology and partnerships that will further these goals. 

The adoption of digital payments is becoming increasingly relevant and, in Africa, mobile phone adoption is inextricably linked to this. For millions who have never had a brick-and-mortar bank account, leapfrogging legacy banking to digital first banking services is an easy transition.

This dynamic makes it even more important for institutions in the financial payment space to adopt digital first platforms. The Mastercard Digital First programme provides the company's partners with a complete digital experience in the world of payment methods.

Digital First provides the customer with a 100% digital product: no paperwork, branch visits or snail mail. Customers can open a bank account immediately by uploading identification, apply for a card, activate it, and use it for all their payment needs from their mobile devices. A physical visit to a branch then becomes an optional extra.

Though the financial sector is already digitally transforming, there are still some barriers to progress, which include a preference for cash — often in areas where there is limited infrastructure. It is important to note that access to the internet and data is a critical enabler for adoption of digital financial services. Digital inclusion is a prerequisite for financial inclusion. 

Mastercard is addressing this challenge through its partnerships with Samsung, Airtel and Asante Financial Services to put digital devices in the hands of more people who can pay for them with small, manageable instalments while also building a credit history.  

Digital commerce enabled for small businesses

A stable, growing, connected small business can be the key to financial inclusion for the whole community. Small and medium enterprises (SMEs) have been trending towards digital banking and payments for some time and changed behaviours during the pandemic accelerated this shift. While small businesses traditionally lagged behind larger ones in omni-channel presence, the trend of shopping from home, and the need for touch-free payments in-store ignited a need for them to accept digital payments.

For example, when Mastercard realised that the most urgent need of SMEs in SA was to start selling online using e-commerce, but didn't have the tools or knowledge to do so, it partnered with Standard Bank to launch SimplyBlu.

Powered by Simplify Commerce, SimplyBlu helps small businesses cross the “digital divide” and enter the world of electronic trading. It acts as a “one stop shop” allowing them to easily set up an online store with billing facilities and accept a range of payments. It's the first service of its kind to be offered to SMEs by a financial institution in SA. (Read the SimplyBlu case study here.)

New technologies such as Mastercard’s Tap on Phone, which turns an Android phone into a contactless card payment acceptance device, is further helping small businesses to adapt.

For microbusinesses that largely operate in the cash economy, Mastercard Quick Response (QR) code technology provides a simple and more affordable solution to accept card payments than traditional point-of sale devices for both online and face-to-face transactions.

Access to credit is also a major paint point in Sub-Saharan Africa, with SMEs facing a huge finance gap of $330bn, according to the World Bank. In Kenya, a partnership between Mastercard, consumer goods company Unilever and KCB Bank helped resolve the need for financing.

Called Jaza Duka, Swahili for “fill up your store”, the resulting programme connects the dots between the small retailer, which has been procuring and selling little shampoo sachets for years, and the bank. The distributor who sells to the store owner becomes the data intermediary, making it possible for the store owner to get credit from the formal rather than the informal system at one-tenth the cost. Mastercard also teamed up with Kasha, the purpose-driven digital retail and distribution platform, to include an additional 5,000 micro, small and medium enterprises into the programme.

Kasha has a long legacy of collaboration with Mastercard, having joined its Start Path engagement programme in 2019.

Start Path invites later-stage fintech start-ups to participate in a rigorous six-month engagement programme, benefit from mentorship and get introduced to Mastercard's broad network of partners about the world. More than 300 companies globally have come through this programme, and the company has seen stars from SA, Nigeria, Kenya and Rwanda excel in driving financial inclusion. 

Hello Tractor is another example of a successful African Start Path company. It connects tractor owners to farmers through an internet of things-enabled digital solution that bridges the gap between manual and mechanised farming. This gives smallholder farmers easier access to affordable tractor services and equipment rental, so they can plant on time and increase yields.

Reaping real rewards in agriculture 

In Sub-Saharan Africa, more than 60% of the population are smallholder farmers. Economic growth from agriculture in Africa is four times more effective at reducing extreme poverty than any other sector. Inclusion in agriculture is a fantastic place to make an impact.

Yet farmers face significant challenges, including limited access to markets, access to working capital to secure quality seeds and pesticides, and access to relevant financial tools to pay and get paid efficiently. 

To help smallholder farmers overcome these challenges and transition from subsistence to commercial farming, Mastercard launched a digital platform in 2015 called Farm Pass, bringing together various agri-sector stakeholders from the supply and demand sides in one agricultural marketplace. Smallholder farmers can sell their produce at a better price, access quality inputs and farming information, get paid and pay digitally, and develop a financial profile that can unlock financing opportunities for working capital and inputs.

Across Africa, Farm Pass has helped nearly 1-million smallholder farmers access better prices to date. It is transforming agricultural ecosystems and connecting farmers to the formal financial system, also providing them with a digital record that could support future loan applications. During the pandemic, farmers were able to sell produce at 25%-50% higher prices by connecting directly with buyers in Farm Pass, even though local markets were closed. 

Soon, more farmers will discover its benefits because of the partnership between Mastercard and Ecobank Group, which will see Farm Pass rolled out to 33 countries across Sub-Saharan Africa, growing the solution’s footprint beyond Uganda, Kenya and Tanzania where it is now live.

And as more farmers move from subsistence to commercial farming, it will in turn stimulate agricultural growth, increase competitiveness, and improve food security in Africa — which has also experienced the knock-on effects of disrupted supply chains due to the Ukraine crisis.

Tech for good

These solutions, which help create new connections, truly showcase how Mastercard is using “tech for good” — and its efforts are being recognised. In fact, it was awarded Best Financial Inclusion Services Provider at the recent Digital Banker Awards, for three markets, namely Kenya, Nigeria and SA.

Mastercard’s goal is to build a connected digital economy that is secure, sustainable and financially inclusive, and one that works for everyone. Such ecosystems are built as a concerted effort undertaken by private and public stakeholders — and the company will continue collaborating with like-minded partners, in and beyond payments.

By applying its insights and solutions to forge pioneering and scalable commercial models across sectors and industries, Mastercard can enable a bright and more financially inclusive future for all.

This article was paid for by Mastercard.