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MasterCard's Aggregation Agency Banking

Most times, it is just hard to help informal sector participants in Africa. They have no credit, and in some cases no bank accounts. You know that activities are happening, yet, the path to unlock value in what they do remains hard.

MasterCard has unveiled Kionect, a digital ordering system that empowers small kiosk owners in Nairobi to order and pay for products from wholesalers via SMS. Orders submitted via a feature phone helps create a digital record for kiosk owners to get access to micro-loans to stock inventory and grow their business.

Apparently, MasterCard wants to use the data collected to help build credits for these shop owners. Simply, MasterCard will be the aggregator, collecting the data and then delivering the data to other companies like Musoni, a micro-finance, to make loans on these traders.

Kionect, technology from Mastercard, provides a digital log of transaction data that qualifies these micro-retailers for loans to stock inventory from Musoni, a regional micro-finance provider. With every loan that is paid on time, the kiosk owner has the opportunity to take out a larger loan for a longer term and further contribute to the growth of their business.

The heart of MasterCard vision on this project

For the nearly 100,000 kiosk owners in Kenya, there is no way to qualify for traditional, financial products such as loans and lines of credit offered by banks and financial institutions. This is largely due to the fact that these businesses run on cash, which means they have no financial track record. In addition, there is no mechanism for kiosk owners to place stock orders directly with the wholesaler, which makes it challenging to stock fast moving inventory.

So, MasterCard plans to provide the data and then make it possible for partners to make loans on these traders. This is a typical aggregation construct. If they succeed, as they noted, they will scale it and integrate it in most of their pan-African services. Aggregation is a solid model for building model digital businesses.

After the initial pilot, Mastercard will embed the most successful services and features of Kionect into solutions designed for scale in partnerships with global Fast Moving Consumer Goods (FMCG) companies in emerging markets.

The banks should take note because this is pure agency banking but with focus on building credit while facilitating trading. If MasterCard can get these shop owners, they can do all within its ecosystems, and that means banking services have been disintermediated. Finding how to unlock value in the informal sector in Africa remains challenging. It will take resources.

MasterCard has huge resources to support this project, and they could succeed because what they are doing is simple: provide the platform, and let the ecosystem participants come and do business, and then pay taxes (to MasterCard) for the opportunities.

It won't be easy for varying reasons, but I see a possibility where even wholesalers can be taken out, the small shops being able to deal directly with the distribution centres, perhaps run by the FMCGs or third-party companies. That could make it a sort of semiformal, and help standardise the processes, including building trust on all sides. It can be done!