Financial inclusion allows underserved populations to better manage their incomes, increase their productivity and reduce their vulnerability to poverty by removing hurdles that exclude them from the financial sector.
According to World Bank data, great strides have been made toward financial inclusion in the last decade, supported by mobile network coverage and technology expansion.
Between 2011-2017, at least 1.2 billion adults worldwide gained access to a bank account. However, the reality is also that about 1.4 billion adults, mainly in hard-to-reach areas and some of the most vulnerable, are unbanked.
Providing access to finance is only one aspect of financial inclusion.
Encouraging and sustaining financial product and service usage by providing relevant services, building trust, improving customer service and ensuring regular training and capacity building for customers such as smallholder farmers are other aspects just as important for sustainability.
One way in which financial inclusion may be delivered, scaled and deepened is by incentivising private sector businesses that are built for-profit but focused on social good as well.
Supporting such businesses may include making direct investments into them, taking up equity in the businesses, offering them more attractive commercial financing, or creating relevant partnerships that improve their overall capabilities, market readiness and competitiveness.
While many approaches driving financial inclusion exist, a unique vehicle deployed to de-risk innovative financial services and support the growth of a suite of relevant financial products and services for rural Africa through private sector businesses is the Mastercard Foundation Fund for Rural Prosperity.
This $50 million challenge fund was established by the Mastercard Foundation and is managed by KPMG East Africa’s International Development Advisory Services.
Through a competitive process, this fund selected and supported 38 private-sector businesses in 15 countries in sub-Saharan Africa to drive financial inclusion among the underserved.
This and more successes require private sector organisations and their financial inclusion-focused programmes to be sustainable despite constantly changing markets, environments and challenges, notably witnessed during the pandemic period.
Through its eight-year journey, the Fund supported vastly different business models to innovate and scale up financial inclusion.
For example, some participants are technology-driven like Apollo Agriculture which leverages machine learning to deliver input finance and agronomic advice to smallholder farmers, or Copia which opened up e-commerce channels targeting underserved rural markets.
Other participants are insurance-based like APA Insurance which provides affordable insurance services to rural Kenyan farmers or Pula Advisors which develops and distributes insurance products and tailored agronomy advice to protect smallholder farmers from risks and increase their income.
The Fund has also supported participants in the renewable energy sector like Easy Solar which provides accessible and affordable solar-related products to remote and low-income households, and Baobab+ which provides a leasing experience for solar energy products based on energy savings to rural customers.
The portfolio also includes participants such as FutureLink Technologies in Uganda which has developed and provides banking systems for savings and credit co-operatives (SACCOs) and microfinance institutions (MFIs).
Inuka Afrika, a non-deposit-taking microfinance firm based in Kenya, shows that women and the youth are emerging as a section of the population keenly interested in pursuing agriculture as an enterprise.
This is driven by the availability of responsive bundled services that come with the financial products offered.
In Uganda, Ibero, a coffee export firm, has improved the lives of local farmers as producers of green coffee beans by setting up a sustainable sourcing and marketing service known as ‘Bloom’.
Under Bloom, Ibero provides financing options to farmers including inputs such as fertilizer.
In making the argument for more direct investment in support of financial inclusion, participating businesses in the Fund were required to commit to matching the financial support (grants) provided in the project.
For example, the businesses sourced investments from single or multiple sources including commercial banks, from existing shareholding and new partners willing to make direct investments into their programs.
To date, over US$ 90 million has been leveraged into these companies, outstripping the initial support made by the Fund itself by a ratio of almost 2:1.
Additionally, the Fund set about de-risking innovation in its portfolio to the extent that several of the businesses supported became more attractive to investors or attracted major commercial funding on their own merit which was not easily accessible before.
Direct investments sourced by these businesses are being put to important use such as improving operations within the businesses, increasing their asset bases to deliver financial inclusion, upgrading their technology use for data modelling, efficiency and scale, and extending their physical agent networks to build relationships with rural customers.
As a result of the work of the Fund, millions of underserved customers are now better integrated into financial systems, taking loans to grow their farms, using insurance to withstand shocks, buying affordable assets like solar water pumps to increase productivity and more.
As shown in the latest Fund impact report, a staggering 5.3 million customers in Sub-Saharan Africa have now been supported through the work of these 38 incentivized and supported businesses.
