Financial inclusion is on the agenda this year for International Finance Corporation (IFC), a member of the World Bank, and MasterCard, who recently inked a deal setting the stage to begin offering millions of consumers and small businesses in emerging markets the ability to make and receive electronic payments, and eventually give them access to debit and credit cards.
This new agreement broadens their already existing relationship, and includes establishing a secure $250 million risk-sharing facility, which is seen as being an important step in their ongoing efforts to boost universal financial access by 2020.
“The facility is a key step in the World Bank Group’s efforts to support the development and expansion of private sector electronic payments in emerging markets and reach our goal of universal financial access,” said IFC Executive Vice President and CEO Jin-Yong Cai. “It will benefit individuals and small businesses by improving the availability of non-cash financial services, which are safer, more transparent and more efficient than cash.”
When electronic payments are available they reduce the cost of day-to-day transactions and boost security, which is a win-win for small businesses and consumers. While banks and institutions in developing countries often want to offer electronic payments, the need for collateral in order to cover settlement risk gets in the way.
More credit and debit cards on the horizon
The risk-sharing agreement is critical in this initiative because it offers participating financial institutions in these areas alternative coverage and lets them share the settlement risk, resulting in the ability to issue millions of new credit and debit cards to lower income consumers.
Other key features of this deal include:
- Enhanced ability for new financial institutions to become part of the MasterCard Network, while already existing ones will be able to reach more customers by expanding their payment services.
- Reaching out to institutions that have very little or no ability to use payment platforms.
- Individuals and/or small businesses that now make payments or receive payments in cash or have limited access to electronic payments will have more options.
“To reach MasterCard’s goal of an additional 500 million people connected to financial services by 2020, we must all roll up our sleeves and get creative in how we build public-private partnerships. This partnership with the IFC is a model for how we can create opportunities and remove barriers for banks to include more people in the financial fold,” said Ajay Banga, CEO and president of MasterCard.
IFC is a global development institution focused on the private sector. They currently work with private endeavors in over 100 countries, using their capital and knowledge to help do away with extreme poverty and build prosperity.