International Finance Corporation (IFC), a World Bank associate, is partnering with the MasterCard Foundation to support financial institutions in providing loans and other financial services to less-privileged entrepreneurs in Africa. Both bodies will spend $37.4 million over five years to support banks and other financial institutions across Africa in providing small loans to develop private sectors on the continent.
The initiative also targets banks and communications companies that help mobile phone users send and receive money and get access to other banking services. Mobile phones access means people in remote rural areas and urban slums, where banks have been reluctant to build branches, can still get banking services.

“This partnership leverages IFC’s global expertise, local knowledge, and client networks to promote greater financial inclusion,” said Nena Stoiljkovic, IFC Vice President for Business Advisory Services.
“It will help IFC clients do more for low-income customers in Africa,” she added.

The project is expected to benefit about 5.3 million people living in Sub-Saharan Africa. The corporation estimated that only about five to 25 percent of African households have bank accounts or other relationships with financial institutions. It says only two percent of the world’s microfinance institutions are in Africa. As a result of this, both organisations are seeking to expand the microfinance frontier in Africa.

According to the President and Chief executive of The MasterCard Foundation, Reeta Roy, Mastercard and IFC were seeking to radically expand access to banking for Africans at a time when their continent’s middle class is expanding and political stability is growing.
“Disadvantaged people derive real benefits from having more control over their finances, and our partnership with IFC will help bring responsible financial services to a significant number of people in Sub-Saharan Africa,” she said.
She said the project is “part of a much, much larger story. It’s the story of the political, economic and social transformation that’s happening across this continent.”

Also speaking on the project is the Vice President of IFC for sub-Saharan Africa, Thierry Tanoh. He expressed optimism for microfinance growth in Africa , saying: IFC sees microfinancing and mobile banking as priorities in the campaign to ensure more Africans have access to banking services.

The concept of microfinance for national development was first conceptualized in the 1970s in Bangladesh by 2006 Nobel Peace Prize Economist Muhammad Yunus – and since then it has been a success in its application in parts of the world where it is practised.

In 1997, IFC began investing in Africa’s microfinance program and now one of the top three global investors in microfinance. However, it was not until 2006 that MasterCard joined the movement of microfinance development in Africa. Since then, its commitment has grown having forged partnerships worth more than $230 million.

Over the years, IFC has continued to invest in the financial network of Africa. In the early days, it invested in mobile financial services, supporting pioneers such as WIZZIT in South Africa, and providing advisory support to MTN in Nigeria and Airtel in Madagascar. IFC’s portfolio includes six investments with dedicated e-payment service providers, and investments with financial intermediaries and mobile network operators offering mobile wallets.

Its microfinance and mobile financial services programs in Sub-Saharan Africa have received support from the African Development Bank, Austrian Development Bank, the Swiss State Secretariat for Economic Affairs (SECO), and the governments of Austria, Denmark, Japan, Luxembourg, and the Netherlands.