How Digital Financial Services Can Support Economic Opportunity in Central AmericaMay 28, 2021
With Latin America facing its worst economic downturn in two hundred years and vaccine distribution lagging, there is more urgency than ever for a collective response to drive an equitable, sustained recovery. The necessary acceleration in adoption of digital tools by governments and their residents presents a renewed opportunity to rebuild the economy in a way that builds pathways for families and small business owners to a more financially secure future.
The implications of living in a cash economy and being left out of the formal financial system are vast. Providing more services online is more efficient, safe and creates opportunities for growth. Access to a simple, secure digital account is far more than a convenience. It can mean transparency in getting the market price for your crop, an ability to build savings and gain access to credit, or safely receive a paycheck.
That’s why Mastercard is committing to bring 5 million people in El Salvador, Guatemala and Honduras into the formal financial economy and to digitizing 1 million micro and small businesses following a call from U.S. Vice President Kamala Harris to accelerate economic opportunities to the Northern Triangle region of Central America.
This is not new territory for us. Last year we reached our five-year goal of bringing 500 million previously unbanked people around the world into the financial system. We then doubled down and committed to bring 1 billion people and 50 million small businesses into the digital economy by 2025 with support for 25 million women entrepreneurs. Our new commitment in the Northern Triangle is an important part of this initiative.
Our partnerships with banks, fintechs, NGOs and governments in Latin America are already bearing fruit. A digital payments program for farmers in southern Mexico shifted coffee growers’ payments to an electronic account, with simple electronic point-of-sale systems set up in more than 200 small shops where the coffee growers purchased their food and supplies. That means no more long trips to the nearest city to cash checks. Training offered to farmers helps them manage and save their money, reducing earnings lost to intermediaries and increasing transparency between farmers and their buyers.
Our work in Latin America continues to be a focal point for our financial inclusion efforts, including forging partnerships with governments to accelerate digitization. We are now working with Panama to digitize its infrastructure and economy with an aim to accelerate inclusive economic growth. That includes digitizing public transit, providing access to affordable tools and services for small businesses to grow, and building a digital infrastructure to reach remote communities, helping them secure access to not only financial tools but vital services such as healthcare and education.
For example, we have been been supporting the digital transformation of micro, small and medium-sized companies to help them survive and thrive. Through the launch of Digital Allies in Latin America and the Caribbean, we’re working with technology partners to help them make the shift to digital business strategies and online platforms.
In partnership with Mercado Libre, the largest e-commerce site in Latin America, Common Cents Lab, and the Inter-American Development Bank, we’re piloting work in Mexico to design strategies based on behavioral science to support financial resilience for small businesses and gig workers.
Latin America also has one of the highest rates of early-stage entrepreneurship by women in the world, so alongside this, we have been unlocking new models of microcredit for businesses with Unilever, working with USAID under the Women’s Global Development and Prosperity Initiative to support the growth of women entrepreneurs in Latin America. In January, Mastercard and USAID launched Start Path Empodera, a business accelerator focused on promoting women’s entrepreneurship and financial inclusion in Colombia.
LEADS Mujer, a partnership between Mastercard and the INCAE Business School in Costa Rica, helps women business owners across Central America strengthen their professional skills by providing targeted training. Thelma Martinez de Anda of Honduras was able to pivot her wholesale prepared food business to produce delivery to families in lockdown, crediting the program for helping her business surviving the pandemic: “I applied everything I learned – above all, to be flexible when it comes to change.”
The past year has shown how critical digital technology is for people and businesses across the world to be able to access opportunity and have pathways to economic mobility. And we remain committed to harnessing innovation and technology to create these opportunities to ensure the economic recovery includes everyone.