Mastercard: Growing Africa’s Digital Economy From the Soil Up

Rhea-AI Summary

Mastercard and the African Development Bank Group have launched the MADE Alliance (Mobilizing Access to the Digital Economy) initiative to bring 3 million farmers in Kenya, Tanzania, and Nigeria into the digital economy. This is part of a larger plan to enable digital access for 100 million people and businesses across Africa in 10 years.

The initiative will provide farmers with a digital identity and access to a network of 6,000 digital agricultural agents through Mastercard's Community Pass infrastructure. This technology aims to connect smallholder farmers, who often lack visibility and access to financial services, with banks, buyers, traders, and insurance companies.

The MADE Alliance focuses on digitalizing agriculture to boost sustainable access to critical services, including affordable digital financial services, internet connectivity, digital skilling, clean energy asset financing, and access to markets. This initiative is expected to bring significant efficiencies to the marketplace and reduce waste and fraud across the ecosystem.

Positive

• Initiative aims to bring 3 million farmers into the digital economy
• Part of a larger plan to enable digital access for 100 million people and businesses in Africa
• Provides farmers with digital identity and access to 6,000 digital agricultural agents
• Aims to bring efficiencies to the marketplace and reduce waste and fraud

Negative

• Challenges in bringing solutions to remote and rural communities with connectivity
• Low operational efficiency of farmer cooperatives in Africa
• Low prevalence of digital literacy among farmers
• High costs of transporting goods to market remain a barrier

Insights

Financial Analyst

This initiative, while ambitious, is unlikely to have a significant immediate impact on Mastercard's financial performance. The MADE Alliance targets a relatively small portion of Africa's population and focuses on long-term development rather than short-term revenue generation. However, it aligns with Mastercard's strategy to expand its presence in emerging markets and could yield future benefits.

The potential $1 trillion agricultural sector in Africa represents a substantial untapped market for digital financial services. By providing digital identities and access to financial services for 3 million farmers initially, Mastercard is positioning itself as a key player in the digitalization of Africa's economy. This could lead to increased transaction volumes and revenue streams in the long run.

Investors should view this as a strategic investment in future growth rather than an immediate profit driver. The initiative's success could strengthen Mastercard's brand in Africa and create a competitive advantage in an emerging market with significant potential.

Market Research Analyst

The MADE Alliance initiative demonstrates Mastercard's commitment to expanding its reach in underserved markets. By focusing on smallholder farmers and women in Africa, the company is tapping into a vast, untapped customer base with significant growth potential.

The digital identity and financial services provided through Community Pass could lead to increased financial inclusion and economic activity in rural areas. This aligns with global trends towards digitalization and financial inclusion, potentially positioning Mastercard favorably in the eyes of socially conscious investors and consumers.

However, the challenges of infrastructure, digital literacy and regulatory environments in target countries may slow the initiative's progress. The 10-year timeframe for reaching 100 million people suggests a gradual impact rather than immediate market disruption.

Investors should monitor the initiative's progress and its potential to create new revenue streams in previously inaccessible markets. Success in Africa could serve as a model for similar initiatives in other developing regions, expanding Mastercard's global footprint.

By Vicki Hyman

Mastercard

NORTHAMPTON, MA / ACCESSWIRE / October 1, 2024 / There is an economic sector in Africa worth $1 trillion a year, and yet most of the people who work in it are invisible.

"Farmers are the folks that you don't see," says African Development Bank Group President Akinwumi A. Adesina. "Banks don't see them. Buyers don't see them. Traders don't see them. Insurance companies don't see them."

These smallholder farmers often live in remote areas with little connectivity, leaving them with no digital footprint and limiting their access to better prices, loans and innovative agricultural inputs like climate-resistant seeds.

But a new initiative called MADE Alliance, which stands for Mobilizing Access to the Digital Economy, aims to bring 3 million farmers in Kenya, Tanzania and Nigeria into the digital economy. It's the first phase of an ambitious plan, launched earlier this year by the African Development Bank Group and Mastercard, to enable digital access for 100 million people and businesses across the continent in 10 years.

The farmers will be provided a digital identity and access to a network of 6,000 digital agricultural agents through Mastercard's Community Pass infrastructure, which provides access to the digital economy though a digital credential that enables farmers to access any service on the platform.

Adesina, the African Development Bank's Beth Dunford, who is vice president for agriculture, human and social development, Community Pass founder Tara Nathan, and other partners shared their insights at a reception last week on the sidelines of the United Nations General Assembly, where Mastercard hosted the inaugural MADE Alliance Steering Committee meeting to review progress and discuss open challenges and required support to scale MADE programming.

MADE's deployed programs include unlocking affordable digital financial services for sunflower farmers in Tanzania, internet connectivity and digital skilling for farmer cooperatives in Kenya, clean energy asset financing for farmers in Kenya, and access to markets via Community Pass.

The Mastercard Newsroom spoke with Dunford about the challenges facing smallholder farmers, the possibilities digitalization affords and why investing in female farmers in particular is, in her words, "smart economics."

Why did MADE Alliance Africa chose to focus on the digitization of agriculture for smallholder farmers and women as its first initiative, and why do you think the African agriculture sector holds so much potential?

Dunford: Africa is home to 65% of the planet's remaining uncultivated, arable land, and we believe that agriculture is a critical sector to drive Africa's development. Agriculture accounts for nearly 60% of total employment in Africa and accounts for more than 25% of GDP in its low-income countries. Across the continent, there's no agriculture without women. They provide an estimated 60% to 80% of labor input to the sector. Growth in agriculture is terribly effective compared to many other sectors in lifting people out of poverty, providing degrees of agency to women, for feeding Africa's people and positioning the continent as a breadbasket to the world.

Our challenge is that the majority of Africa's food systems producers are smallholder farmers who, simply put, struggle from season to season due to lack of access to quality inputs like seeds and fertilizer, or access to affordable financing to purchase farming necessities. Africa's smallholder farmers have a variety of needs that the MADE Alliance Africa can solve by boosting sustainable digital access to critical services. MADE Alliance aims to work with local banks to initially provide digital identities to millions of smallholder farmers and women. Digital identities are the gateway to accessing digital services and to high-quality inputs.

Take, for example, that an estimated 99% or more of agriculture transactions in Africa are cash-based - 99%! Digitalizing agriculture and the distribution of goods will bring enormous efficiencies to the marketplace, as well as reduce waste and fraud across the ecosystem.

Mastercard's Community Pass can help establish digital identities for millions of farmers, bring more transparency to pricing and help them access agricultural inputs. What are the challenges involved in bringing this solution to market, and how can they be overcome?

Dunford: Community Pass is designed to operate in remote and rural communities - often with limited connectivity and energy access. This technology, to adapt a popular phrase, "meets farmers where they are." However, there are challenges involved in bringing these solutions to the "last mile" and connecting smallholder farmers and women to financial institutions - challenges that we believe can be overcome or mitigated, including capacity building, infrastructure and the need for new models for governments and the private sector to work together.

To scale these technologies to more farmers in a timely manner, we need to work with farmer cooperatives, networks of member farmers who reap many benefits of doing business as a unit. The challenge is that the majority of farmer cooperatives in Africa are not as operationally efficient as they are in other regions, and the prevalence of digital literacy is relatively low. Africa needs significant investment to educate farmers on how they can benefit from digital technologies to access resources.

MADE Alliance's digital services can connect farmers to new buyers and suppliers who are physically far away, but costs to transport goods to market remain a barrier. Critically, farmers and women need digital devices and reliable connectivity to take advantage of the digital economy.

Finally, local governments see the benefits of digitalization in agriculture, but they can benefit from access to clear models for engaging with the private sector to develop a robust digital ecosystem. Tendencies to centralize digital infrastructure related to agriculture inhibit private-sector participation and make it difficult for businesses to develop sustainable models to serve agricultural communities.

Can you talk a little more about how the MADE Alliance will benefit women?

Dunford: Roughly half of Africa's smallholder farmers are women, with the majority of agriculture sector labor carried out by women. However, compared to their male counterparts, female farmers struggle to create a sustainable livelihood in agriculture, because they are less likely to own property titles or other assets often needed to access financial services. Women farmers have less access to information and extension services, and they lack access to inputs such as seeds and fertilizers. They are disproportionately impacted by climate risks. Collectively, these challenges result in women farmers typically producing up to 20% to 30% less output than male farmers.

The Community Pass initiative helps women make farming a sustainable livelihood by enabling access to critical service providers like banks and agricultural buyers, as well as creating transparency.

Women are the backbone of African economies, and investing in women entrepreneurs fosters women's empowerment and agency over decisions around business, family and community. Investing in Africa's women entrepreneurs is smart economics. Investing in Africa's women has been a cornerstone of the Bank's work. In fact, no Bank project or program will receive Bank financing, unless it details how it will benefit women.

Beyond Community Pass, what role can the private sector play in strengthening the food supply chain in Africa, particularly in making smallholder farmers more resilient? What can governments do?

Dunford: MADE Alliance includes Equity Bank Group, Microsoft, Heifer Foundation and Unconnected.org and soon will add another four to five global and local partners signing on to membership. We welcome more. The MADE Alliance offers a new approach to partnership - one that is private sector-led and thus commercially sustainable by design. Our partnership is anchored in line with the Bank's regional member countries' national policies.

Importantly, the MADE Alliance makes the case that for the private sector, sustainability means profit. Alliance-facilitated partnerships between donors and governments are critical to provide the catalytic funding and regulatory support that de-risks private-sector entry into agriculture markets and segments where margins are razor-thin. Every MADE Alliance program is anchored by a private-sector entity, with other partners crowding into the same community, providing complementary services or funding to bring the program to life.

Originally published by Mastercard

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SOURCE: Mastercard

View the original press release on accesswire.com

FAQ

What is the MADE Alliance initiative by Mastercard (MA) and African Development Bank Group?

The MADE Alliance (Mobilizing Access to the Digital Economy) is an initiative to bring 3 million farmers in Kenya, Tanzania, and Nigeria into the digital economy by providing them with digital identities and access to a network of 6,000 digital agricultural agents through Mastercard's Community Pass infrastructure.

How many farmers does the MADE Alliance aim to reach in its first phase?

The MADE Alliance aims to reach 3 million farmers in Kenya, Tanzania, and Nigeria in its first phase.

What is Mastercard's (MA) Community Pass infrastructure?

Mastercard's Community Pass is a digital infrastructure that provides access to the digital economy through a digital credential, enabling farmers to access various services on the platform, including financial services and market access.

What challenges does the MADE Alliance face in implementing its digital solutions for farmers?

The MADE Alliance faces challenges such as connectivity in remote areas, low operational efficiency of farmer cooperatives, low digital literacy among farmers, and high costs of transporting goods to market.