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Mastercard to Help Distribute South Africa Welfare Grants

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 Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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