In Africa, fewer than 25 percent of adults have and use a bank account. In rural areas, where the majority of Africans live, the situation is worse — a resident there is only half as likely to be “financially included” as those who live in urban areas.
Those people living in rural areas mostly farm and are most often poor. While the economy in Sub-Saharan Africa has strengthened rapidly in the past decade, this has not always translated into more jobs, particularly in rural areas, to help this population.
Despite being home to the world’s largest share of arable land, agricultural yield in Africa is low. Increasing agricultural productivity is the greatest opportunity for reducing poverty on the continent.
At The MasterCard Foundation, we believe the key to improving agricultural productivity is to enable farmers and others in rural Africa to access and use the banking system, just as many urban residents do every day. Farmers need to be able to open savings accounts in order to create a reserve, buy affordable insurance to protect against unforeseen harm and borrow at the right time in order to invest in agricultural improvement (for example, purchasing fertilizer or investing in more reliable ways of storing crops and getting them to market).
The private sector can play a critical role in bringing about change, yet financial service providers have hesitated to do so. Because of distances involved, low population densities and the perception that poor people have little disposable income, the private sector may see the cost of serving the rural poor as prohibitive and the returns on the investment required as inadequate.
Yet when smallholder farmers and other people living in rural areas are able to access financial products or services specifically designed for their needs, they embrace and use them. Financial service providers acquire new clients who may remain with them for life and who ultimately can have a positive impact on the bottom line.
The obstacles of distance and low population density in rural areas can be addressed with the smart use of emerging technologies. The cost of doing business in rural Africa can become low enough to encourage commercial banking to expand on the continent, allowing it to build a viable customer base and business model.
To accelerate this transformation, The MasterCard Foundation is today launching a new $50 million challenge fund called The MasterCard Foundation Fund for Rural Prosperity.
The Fund will improve the lives of one million smallholder farmers and other people living in poverty in rural Africa by encouraging the ingenuity of African businesses in or related to the financial sector. It is doing this through two competitions per year over the next three years in 24 countries. One competition seeks innovative ideas for bringing affordable and appropriate financial products and services to rural Africa. The second competition supports the scaling of these ideas once proven.
This is an exciting initiative and we look forward to working with the financial sector in Africa to transform the lives of people in need. Our goal is to improve their livelihoods and enable them to make real progress in their move out of poverty.