NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, April 21, 2015

International 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.