Across East Africa, millions are trapped in a cash economy, lacking financial services to help them fight risk, invest in their future and ultimately build better lives. There is an urgent need for the creation of commercially viable products and services for the unbanked and underbanked where less than a quarter of adults have an account with a formal financial institution.
In effort to better this situation, MasterCard announced the launch of MasterCard Labs for Financial Inclusion, located in Nairobi, Kenya – East Africa’s technology hub. According to a company release, the initiative aims to impact the lives of more than 100 million people around the world “by developing practical and cost-effective financial tools that expand access and help build stable futures over the long term.”
The Bill & Melinda Gates Foundation has granted the lab $11 million over the next three years to spark new ideas with local entrepreneurs, governments and other stakeholders across East Africa, says MasterCard, in hopes to rapidly move the concept to reality. The Gates Foundation works with the private sector, NGOs, governments and more to direct resources and expertise and address critical challenges that can’t be solved by market forces alone.
President and CEO of MasterCard Ajay Banga noted in the release that, “too many people lack access to the most basic financial services, leaving them trapped in a cash economy that imposes greater risks and costs on those least able to afford them.” Thus, the Gates Foundation’s investment would serve to help MasterCard “open up a world of inclusion and help people build a better, brighter futures.”
This new lab follows the August launch of MasterCard’s ground-breaking program in Nigeria, which uniquely combines a national ID card with electronic payments. In a recent interview with MPD CEO Karen Webster, Daniel Monehin, MasterCard’s Division President for Sub-Saharan Africa, said that the cards would be delivered to an estimated 100 million people, making electronic payments available and secure for everyone ages 16 and up.
“Nigeria is the second largest market for transferring funds, over $20 billion a year, and the national ID card is a solution for that,” Monehin told Webster. He later inferred that the program has the potential to be a financial inclusion game-changer across the globe.
In addition to the Nigerian National Electronic Identity Card program, the lab also builds on the progress MasterCard has made in other areas across the continent, including in East Africa with its rollout of one million Nakumatt Global MasterCard Prepaid cards, in Kenya with the roll out of five million EMV, contactless-enabled debit and prepaid cards in collaboration with Equity Bank, in Egypt with the launch of the mobile payment wallet “Flous,” and more.
Globally, digital payment innovations let more people take advantage of formal financial services, says MasterCard. These tools are easy to use, efficient and could dramatically reduce costs. But despite these innovations, there are still 2.5 billion adults around the world who are excluded from the formal financial system. The new lab, which is part of MasterCard Labs, will therefore play a role in generating financial inclusion solutions and “fast-track the best ideas from concept through prototype, pilot and into commercialization faster than ever before,” says MasterCard.
MasterCard will manage the MasterCard Labs for Financial Inclusion in a manner that ensures Global Access – the results that stem from the lab will have true benefits for the poor, with the widest possible application and the ability to extend solutions both regionally and globally.