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Mastercard to onboard 1bn people, 50m businesses into digital economy by 2025

Mastercard, a multinational financial services provider has pledged to expand its global commitment to financial inclusion by assuring to bring a total of 1 billion people and 50 million micro and small businesses into the digital economy by 2025.

Driven by the Covid-19 crisis, the New York-based company said the strategy will include a direct focus on providing 25 million women entrepreneurs with solutions that can help them grow their businesses.

“If we’re going to recover in any sort of long- term, sustainable way, we have to make sure that everyone is included. Getting people to access to the digital economy is a critical part of that,” Ajay Banga, chief executive officer at Mastercard said.

According to Mastercard, its new financial inclusion target is an opportunity to develop a commercially-sustainable and scalable social impact with government and private sector partners.

The new commitment is an extension of Mastercard’s pledge in 2015 to bring 500 million excluded people into the financial system.

To attain the MasterCard’s one billion goals, Finextra cited a broad push across a range of fronts, like ongoing work on government disbursements, wage digitization of private-sector workers, partnerships with mobile network operators, solutions for gig workers, scaling efforts with fintechs, digital platforms and digital wallets/apps and tech that addresses needs of the financially vulnerable.

“Achieving greater financial inclusion for individuals and small businesses into the digital economy requires collaboration and unique partnerships across sectors and geographies. As companies like Mastercard extend their financial inclusion commitment, society must adapt to meet the evolving needs of everyone in the global marketplace,” Klaus Schwab, founder and executive chairman, World Economic Forum was quoted to have said.

World Bank’s Global Findex Database of 2017 puts the global unbanked population at 1.7 billion adults, and Nigeria accounts for 36.6 million of that number. The 2018 report by EFINA shows that more than 36.8 percent of Nigeria’s adult population are without a bank account.

The lack of access to formal financial services among Nigeria’s Small and Medium Enterprises (SMEs) has been a threat to their growth as poor credit history hinders their chances of accessing loans for expansion.

Estimated at 37 million, Nigerian SMEs are said to have a finance gap of $158.13 billion, according to the 2017 SMEs report by the World Bank and Finance Forum.

According to the World Bank, SMEs play a huge role in facilitating economic development due to their flexibility and affinity to innovation. “Even more so in emerging economies with a high contribution from the informal sector.”

The recent report by the Washington-based financial institution title: MSME FINANCE GAP- Assessment of the Shortfalls and Opportunities in Financing Micro, Small and Medium Enterprises in Emerging Markets recommended the use of alternative data in assessed the creditworthiness of SMEs.

“Access to credit for MSMEs and individuals can be enhanced and expanded by promoting the use of alternative data in credit reporting,” World Bank said.

Of the total 162 million formal MSMEs in developing countries, 141 million are microenterprises, and 21 million are SMEs, and Nigeria is quoted by the world lender as one of the countries with the highest deposit of MSMEs.

“Three countries – Brazil, China, and Nigeria; contribute 67 percent to the total number of MSMEs, which is equivalent to 109 million enterprises. There are close to 12 million SMEs in China alone, which represents 56 percent of all SMEs in developing countries,” World Bank noted.

World Bank’s claim on the use of alternative data in assessing the creditworthiness of MSMEs can be affirmed by the 2016 report by Global Partnership for Financial Inclusion (GPFI) as it said in its G20 publication that it encourages service providers to use multiple sources of digital data for evaluating consumer and small and medium enterprise (SME) creditworthiness.

“This approach should include appropriate safeguards while facilitating the development of such data and ensuring a fair, nondiscriminatory approach to its use. Examples of such alternative data sources include mobile phone use, utility payments, data enterprise registration information, and other information that can complement traditional loan repayment or insurance-related data,” G20 report explained.

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