IFC, a member of the World Bank Group, and MasterCard have agreed to act together to broaden the use of electronic payments by micro, small and medium enterprises, with the goal of connecting five million such businesses to the global payments network over five years.
As part of the institutions’ drive to achieve universal financial access by 2020, a memorandum of understanding (MoU) was signed recently.
Both companies believe that by just offering individuals a transaction account, the ambitious goal of universal financial access cannot be achieved.
It requires greater collaboration with micro, small and medium businesses with whom most of the unbanked transact daily. Hence, these businesses must be able to accept electronic payments.
The "Financing Facility for Acceptance Development" has been designed to address these challenges, with an eye on Asia, the Middle East, Africa, Latin America and parts of Europe.
IFC and MasterCard together will work to develop and deploy strategies to help banks and payment facilitators reduce the cost of onboarding and/or maintaining the network of micro, small and medium enterprises (MSMEs).
They will boost the ability of banks to take on additional acceptance activity related to merchants; will support working capital facilities including cash advances, business credit cards, overdrafts, loans for merchants.
Further, both partners will explore the establishment of new players focused on onboarding and servicing smaller merchants for acceptance programs.
IFC executive vice president and CEO Philippe Le Houérou said: "Achieving universal financial access by 2020 is a development imperative and a priority for the World Bank Group.
"By encouraging greater use of electronic payment transactions, this partnership will help expand financing to MSMEs — a major force for job creation in developing countries."
MasterCard president and CEO Ajay Banga said, "To help connect an additional 500 million people to financial services by 2020, we can’t focus on access alone.
"A true solution provides the means to use these new accounts and do more of what many of us take for granted. This empowerment of both consumers and merchants is a meaningful and impactful change we can make today."
The recent program builds on a 2015 collaboration between IFC and MasterCard to establish a Risk Sharing Facility that offers alternative coverage and shares the settlement risk of participating financial institutions in emerging markets.