By Patrick McGroarty
JOHANNESBURG--Mastercard Inc. (MA) on Monday announced a new
partnership to distribute South African welfare grants through its
cards and linked bank accounts, a system designed to curtail fraud
and pull poor people into the formal banking sector.
Mastercard is providing branded cards to a small
Johannesburg-based lender, Grindrod Bank, and backing payments by
Net1 UEPS Technologies Inc. (UEPS), a South African company that
designs electronic payment systems in the developing world.
Net1 won a government contract in January to roll out the system
for 10 billion rand ($1.2 billion) over five years. The government
hopes the system will cut graft among beneficiaries of the South
African Social Security Agency, which distributes more than 15
million grants to poor veterans, the elderly and parents--nearly a
third of South Africa's 50 million people.
Mastercard and Net1, which already operates electronic payment
systems in Iraq and Ghana, said the partnership strengthens the
possibility of expanding to other governments on the continent.
"We do believe this is a breakthrough product which can be
leveraged globally," said Sami Lahoud, a Mastercard spokesman for
the Middle East and Africa. Net1 Chief Executive Serge Belamont
said his company is already in discussions to potentially take the
system to 11 more African governments.
The partnership has distributed 2.5 million debit cards to grant
recipients since April 1, and plans to distribute more than 10
million more by March.
Recipients, enrolled at Social Security Agency offices and other
community gathering points across the country, can use the debit
cards at ATMs and stores wherever Mastercard is accepted,
connecting many poor recipients to the formal banking system for
the first time. Beneficiaries can also use their new Grindrod
accounts to make savings deposits and transfers unrelated to their
welfare grants. Government officials and Grindrod executives hope
that capacity will help improve their financial literacy, though
they acknowledge the process will likely be a slow one.
"We really are taking people who have had absolutely no banking
capacity and no inclusion in the banking system, so it will be a
slow process we suspect to build that functionality into their
thinking. But the point being it's all there for them," said David
Polkinghorne, Grindrod Bank's managing director.
Write to Patrick McGroarty at patrick.mcgroarty@dowjones.com
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