A Credit Card Foundation Aims to Help Africa’s Rural Poor. Is That a Good Thing?

Smallholder farmers in Africa face a multitude of challenges including land rights, gender inequality, transport problems, and spoilage issues. Another big challenge: a lack of adequate financing that enables smallholder farmers to grow their operations. 

We've written a fair amount about how funders are zeroing in on this challenge in new ways, so we were pretty interested to hear that The MasterCard Foundation is putting up $50 million for new work aimed at helping the rural poor in Africa—many of whom, of course, are struggling farmers. 

The MasterCard Fund for Rural Prosperity will dedicate $15 million to support the development of innovative ideas for financial products and services that are accessible to the rural poor. The remaining $35 million is set aside to scale those ideas, especially those that focus on financial inclusion of farmers in new rural areas. The foundation says the fund will help 1 million rural Africans. 

The fund will operate with two competitions a year that award funds to organizations that want to test out an idea for "new financial products and services that can effectively meet the financing needs of people living in poverty in rural and agricultural areas," or that want to scale up an existing effort already proven to be effective. The deadline for innovation grants is right around the corner, March 15. The deadline for scaling grants is later this year. 

Related: To Help Poor African’s Escape the Cash Economy, Gates Bets Big on MasterCard

MasterCard, the company, and The MasterCard Foundation are totally separate institutions. But they have both have been heavily involved in the promotion of financial inclusion for Africans for a while now. In 2009, the foundation invested close to $40 million in a partnership with Opportunity International to help provide financial access to people in rural areas of Tanzania, Ghana, Malawi, Uganda, and Rwanda.

Related: Behind the MasterCard Foundation’s Financial Work in Africa

Lest we give the impression that the foundation is all about pushing its financial products, the foundation has interests in Africa outside of getting the unbanked over to the banked side. It recently pledged $500 million to its Scholars Program which aims to help young Africans gain access to quality education at both the secondary and post-secondary levels.

Africa’s agricultural output is estimated to reach around $900 billion in in the next fifteen or so years. It is also home to seven of the fastest growing economies in the world and has one of the largest populations of young people in the world. Connecting rural smallholder African farmers to financial services including loans and lines of credit makes total business sense for MasterCard the company.

But if all this sounds like a win-win, there are reasons to think carefully about what The MasterCard Foundation is up to in Africa. Access to capital is an essential tool for upward mobility for farmers and other small business people. But debt traps can also be deadly for the poor, thanks to interest charges and fees, and credit card issuers have a long and sorry record of exploitative practices in the United States. 

MasterCard and The MasterCard Foundation do good work in Africa, but it’s still difficult not to be at least a little wary about a financial inclusion agenda linked to a credit card company.