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IFC, MasterCard in $250m risk sharing pact to drive financial inclusion


mastercardINTERNATIONAL Finance Corporation (IFC), a member of the World Bank Group, and MasterCard have signed an agreement to establish a risk-sharing facility, which is expected to provide millions of people in emerging markets access to electronic payments, a crucial next step in their ongoing collaboration to increase universal financial access by 2020.

Electronic payments lower the cost and increase the security of transactions, benefitting small businesses and consumers. Financial institutions in developing countries are keen to expand services, but are often held back by collateral requirements necessary to cover settlement risk.

To address these constraints, IFC and MasterCard are setting up a $250 million risk-sharing facility that will provide alternative coverage and share the settlement risk of participating emerging market financial institutions.

It is expected to lead to the issuance of millions of new cards, the majority of which will be debit cards for lower income customers. The focus will be on countries where inclusion needs are the greatest or where payment platforms are nascent.

Key aspects include: increased ability for new financial institutions to join the MasterCard network and for existing ones to grow their payment services offerings and reach a wider segment of customers; targeting of institutions with limited or no capacity to access a payment platform and reaching small businesses and individuals who currently transact most of their business or financial activities in cash or have only limited access to electronic payment services.

IFC Executive Vice President and CEO Jin-Yong Cai said 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 the goal of universal financial access.

“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.”

Chief Executive Officer and President of MasterCard, Ajay Banga, said: “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.”

According to a statement, jointly signed by IFC and Mastercard, which confirmed the agreement in Washinton DC, at the weekend, the two bodies have a multifaceted relationship spanning investments and advisory projects in multiple countries, most notable of which is the Partnership for Financial Inclusion with MasterCard Foundation.

The World Bank Group-MasterCard Partnership aims to enhance financial access in emerging markets by developing and deploying innovative, scalable and sustainable payments solutions that reach institutions and customers in emerging markets with inadequate access to such services.

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