Mastercard strives to close the gap on the digitization of small businesses
Companies have made great strides in digitalization over the past few years, using all kinds of data-driven technologies to improve their operations and explore whole new ways of doing business. Small businesses, however, have found themselves chasing after the technological advancements that large organizations cry out for. The pandemic has only accelerated this digitalization inequality, with larger companies finding even more ways to take advantage of advanced technology and small businesses around the world struggling to survive, let alone optimize their operations.
I spoke with Mastercard’s Center for Inclusive Growth about the company’s ambitious plans to close the digital transformation gap and promote financial inclusion for small businesses in an increasingly digital economy.
For everyone else, there is Mastercard
Recognizing this disparity between large and small organizations, Mastercard announced its Strive initiative, a philanthropic initiative designed to “bridge the growing divide between the digital haves and have-nots,” said Shamina Singh, Founder and President of Mastercard’s Center for Inclusive Growth. Mastercard has invested an initial $ 25 million in the initiative, which will “hopefully accelerate the growth of small businesses in a digital economy,” Singh said, providing access to “electronic markets, to the efficient business operations and financial services “to small and” micro “enterprises around the world. World Bank research suggests that this category of business accounts for around 90% of businesses and over 50% of jobs worldwide. With local programs and partnerships across Europe, Latin America, Asia and Africa and ambitions to help more than five million businesses worldwide, Mastercard is keenly aware of the impact. that these companies could have with a digital helping hand.
Although the company has been working on these types of projects for around seven years now, the rollout of its Strive initiative has been timed to help struggling businesses recover from a year in which larger digitized businesses have made further progress. . “Through our work during the pandemic, we have found that there is a segment of small businesses that are not benefiting at all from the digital economy,” says Singh, “what we are trying to do here is d ‘intervene in a way that allows businesses on the smallest to access the digital tools and services that their larger counterparts have been using for years.
While these interventions typically involve improving access to digital markets, digital tools and services, and training, Singh emphasizes that “the most important thing is meeting companies where they are rather than assuming that there is a unique solution. In Indonesia, for example, Singh describes the Center for Inclusive Growth’s’ micro-mentoring ‘program that’ matches small businesses with local business leaders who can offer them advice and show people how they are doing. makes their small business work in that particular market ”. This micro-mentoring program alone has helped around 25,000 businesses grow so far, with around 30% of participants in Indonesia hiring new employees after the program – “if that’s a sign of growth, and I think it does, so this program seems to be working, ”Singh says.
Systemic change for a digital world
In addition to working directly with small businesses, the work of the Center for Inclusive Growth has focused on leveraging partnerships to adapt long-standing systems and ensure they are financially inclusive in a digital world. Speaking of a small machining company in India, Singh explains how “many companies like Intezaar’s are too big for microloans, but too small and lacking a formal credit history for low bank loans. interest rate – despite a successful business and excellent growth record. Mastercard partnered with a fintech called Aye Finance in India and, lacking a formalized credit history, was able to use “[Intezaar’s] his payment history, his clientele, his propensity to repay a loan and use it as a criterion for granting him a loan, ”explains Singh. This partnership with fintechs and banks goes beyond helping local businesses, it is also helping to digitally transform the way business is done in countries with a large majority of small businesses – 95% of industrial units in India are occupied by small and medium enterprises. companies (SMEs), for example.
This particular problem of small businesses that “fall into the trap” and cannot access low interest loans is felt around the world. For example, Mastercard has partnered with Unilever in Kenya looking at 18,000 micro-merchants in their supply chain to help change the lending criteria there as well. As Singh explains, “With our track record of goal-oriented businesses, we approached Unilever to see if we could use their data (on the buying and selling history of small traders in their supply chain. ) and bring them closer to the banks in a way that allows the bank to look at that data differently. So far, according to Singh, around 18,000 of these businesses in Kenya have benefited, being able to officially prove their effectiveness and grow beyond “stocking their stores with what they could pay in cash.” once “. This change is particularly important for women, because in these markets, “women do not necessarily own assets (like a tractor) to use as collateral, so their ability to access smaller-scale loans really depends on organizations. like ours which works. “In some markets like Asia, even access to smartphones is more difficult for women entrepreneurs, as Singh explains:” without access to guarantees, you cannot finance a business. smartphone, we are therefore also working with fintechs to modify this financing in order to allow women to take advantage of this digital shift.
These partnerships with private sector companies (such as Caribou Digital which are helping Mastercard build its’ community of ‘Strivers’ [entrepreneurial support organizations] that provide access to the services, training and networks that enable them to thrive ”) also extend to the public and civil space, the scope of the program and the data-driven orientation leading to interesting collaborations with Governments. “Over the past seven years we’ve tested so many different digital modalities – does text over the phone work better than in-person training, is a point of sale [point of sale system] work better than a phone – and we’ve invested the time to really dig into what works best, ”says Singh. Using this intensive testing and groundwork with local communities and small businesses, Mastercard hopes their Strive program “will have a disproportionate impact working with governments and building on our data, our work in this space.” said Singh, bringing together organizations that support small businesses and leverage the strengths of others. For example, with Strive UK, Mastercard complements the UK government’s Help to Grow program to ensure “that these interventions reach the communities and micro-businesses that need them,” Singh explains.
Intensify financial inclusion
The timing of the Strive program’s release is no accident, as Singh says: “Covid has surfaced a lot of issues that were already there… companies are on the brink right now, and what we are seeing, is that small businesses fail if they don’t digitize, so we’re stepping up our efforts, but we’re really building on ten years of work in this industry.
This multi-faceted program of partnerships with local organizations, governments and multinationals enables Mastercard to make a real difference in the small business sector around the world. Instead of following a ‘trickle-down technology’ approach to digital transformation, the Strive initiative aims to create a strong community of small and micro businesses “in a way that allows them not only to work together, but also to work together. to move them from analog to digital to scale, “says Singh,” we’re at least trying to get them to a point where they can take advantage of the technology that big companies take for granted. “