Master Accomplishment

“My Business” is a Joint Collaboration on Entrepreneurship Program for Arab Youth between INJAZ Al-Arab and MASTERCARD

MasterCard, a payment industry giant has taken the initiative to join hands with INJAZ Al-Arab, a non-profit organization in the Middle East and co-member of Junior Achievement Worldwide, both collaborating on a corporate volunteering program to provide experiential education and training to Arab youth in work readiness, financial literacy and entrepreneurship. MasterCard will support INJAZ Al-Arab’s ‘It’s My Business’, a leading entrepreneurial mentorship program developed for youth in Lebanon and countries across the Middle East and North Africa (MENA).

The announcement was made February 8th, 2012 at an event MasterCard and INJAZ Al-Arab held at the Intercontinental Phoenicia Hotel, Beirut, marked by the attendance of H.E. Mr. Walid Daouk, Lebanese Minister of Information, Soraya Salti, INJAZ Al-Arab Regional Director and Junior Achievement Senior Vice President, MENA, Patricia Devereux, Group Head, Corporate Philanthropy and Citizenship, Michael Miebach, President, Middle East  and Africa, MasterCard Worldwide, Chady Zein, Principal at Booz & Co., and Basel El Tell, Vice President and Regional Manager, Levant, MasterCard Worldwide.

MasterCard’s support to INJAZ Al Arab’s entrepreneurship program deepens its commitment to further financial inclusion through the power of entrepreneurship.

“All young people deserve an opportunity to reach their full potential,” said Miebach. “MasterCard is proud to work with INJAZ Al-Arab to launch the ‘It’s My Business’ program, which we believe is a great investment in youth in Lebanon and across the MENA. Equipping the youth with entrepreneurship skills will enable them to pursue their own business, thus reducing unemployment rates and allowing them to build stronger futures for themselves and their families while positively contributing to the economic development of their countries.”

 

The program also has the full endorsement of the Lebanese government, allowing a mostly underprivileged public school sector to benefit from international expertise that would otherwise be of scarce availability if not an impossibility. “The introduction of ‘It’s My Business’ program in Lebanon, will provide our youth with a wealth of knowledge on financial literacy and business-related skills, which will allow them to thrive when they enter the real world.,” said H.E., Walid Daouk, Minister of Information, Lebanon.”

 

Carrying forward the vision and inspiration behind INJAZ Al-Arab, is a profoundly committed Salti who said: “Youth unemployment in the MENA region currently stands at 25%, which is double the world average. Moreover, research from Booz & Company shows that on average, youth are waiting five years after graduation to find their first job. Receiving support from MasterCard allows us to address this youth unemployment crisis by improving the workforce readiness, entrepreneurship, and financial literacy skills of Arab youth.”  The pilot of this initiative will be implemented in Egypt, Lebanon, Morocco and Saudi Arabia, after which the curriculum will be made available throughout the INJAZ network of 14 countries.

 

MasterCard, having a deep corporate commitment to a philanthropy agenda, entrepreneurial education, financial education and inclusion, was also intensifying its presence and investment in the MENA region. “We looked at INJAZ and saw that they wanted to expand their core program, which had been the age range of 14-18, down to the age of 11, and this is our sweet spot,” Miebach told the magazine. “This particular pilot program already has scale. We can’t expect 3000 students to become entrepreneurs, but we can expect them to think out of the box, take initiatives, and become positively disposed to do something about their own future. At the same time, it’s important to extend the range upwards, as students go to university, and refresh the concepts to encourage them to do something about all the things they had learned before.”

MasterCard employees will bring their skills set and market experience to the classroom, not to talk about the payments industry, but about their knowledge, transferring it to students, helping them think differently of the world. “The fundamental skills of how to set up a company, how to think about customers, how to differentiate yourself from the market, are all brought using basic concepts that these students understand,” Miebach added. INJAZ depends on these volunteer networks that provide expertise.  “We encourage volunteering and CSR within MasterCard. We free up time for our people with good incentives, and encourage entrepreneurship within MasterCard; it is about people empowerment and risk taking,” added Miebach.

MasterCard believes that economic growth and sustainability cannot be achieved without addressing youth unemployment, creating more jobs through SMEs and tangible business models that work.

Zein of Booz & Co. highlighted some of the MENA’s shortcomings in terms of youth unemployment, entrepreneurship and future needs for regional nations to promote a vibrant entrepreneurial ecosystem and become globally competitive, based on a summary of ideas discussed at the World Economic Forum Special Meeting on Economic Growth and Job Creation in the Arab World, held last October in Jordan.

One of the Arab world’s top priorities in the coming years is job creation. According to the WEF, the region needs to create 75 million jobs by 2020 just to keep employment close to current levels. The key to accelerating job creation will be fostering a business environment in which entrepreneurs can easily start new companies, spread innovation and spur economic activity in general.

 

Booz& Co. identified 10 imperatives that all stakeholders in the entrepreneurial ecosystem should follow to influence and improve the entrepreneurial ecosystem in the MENA region:

 

1.  Offer a helping hand. Established entrepreneurs should give time, advice and seed funding to aspiring entrepreneurs.

2.  Change behaviors and evolve the culture. Discuss entrepreneurship every day and generate hype around a handful of success stories.

3.  Bring entrepreneurship to the classroom. Everyone in high school and university should learn entrepreneurial principles.

4.  Bring entrepreneurship to the office. Companies should encourage employees to unleash their own talent.

5.  Do not imitate Silicon Valley. Identify and leverage your country’s own unique resources.

6.  Welcome new ideas. Engage domestic and foreign workers to encourage a free flow of expertise and enterprise.

7.  Break the stereotype. Great entrepreneurial ideas can come from anyone in any industry.

8.  Embrace the Diaspora. Tap successful entrepreneurs living abroad for their advice and connections.

9.  Eliminate red tape. Governments should give many kinds of support to all types of entrepreneurs.

10.     Expand the venture capital (VC) model. VCs need to go beyond funding and provide a support structure for entrepreneurs.

 

Booz & Co. said that more than one-half of the population in the MENA region is under the age of 25, posing both enormous opportunities and giant challenges. But, unemployment rates are in the high double digits in most MENA countries, including a staggering 35% in Yemen.

 

A key to accelerating job creation in the MENA region is fostering an entrepreneurial environment. Once start-ups mature into SMEs, they become significant contributors to employment and gross domestic product (GDP). (See Exhibit 1).

Entrepreneurial ventures are driven by one or a combination of three factors:

 

•  Lifestyle or passion: Entrepreneurs who are motivated in this way create businesses in fields where they have a particular interest, talent or knowledge.

•  Social good: These individuals are motivated by a social problem and use entrepreneurial principles to create, organize and manage a venture that will bring about socio-economic change for a particular group.

•  Fame and fortune: These entrepreneurs aim big and are driven strongly by the profit motive.  In addition, Booz & Co. identified three external forces that drive entrepreneurship:

 

In addition, there are three external forces or circumstances that drive entrepreneurship:

 

•  Innovation: Some entrepreneurs create new demand by nourishing an innovative idea they have conceived or acquired.

•  Opportunity: Entrepreneurs who recognize a demand/supply gap in the market, an unmet need or an opportunity for change can seize that opportunity.

•  Necessity: Entrepreneurs in this category have been forced by their environment to seek self-sufficiency and satisfy their basic needs of food, shelter and security.

 

At first glance, the MENA region’s entrepreneurial activity today seems robust, says Booz & Co. About 13% of the region’s working population is engaged in entrepreneurial activity, far more than in the US, Germany or Japan (see Exhibit 2). However, this apparent entrepreneurial vigor is deceptive. More than 80% of entrepreneurs in the MENA region have very small-scale operations, with enterprise value of less than $15,000. The high level of entrepreneurship is mainly driven by necessity – shop owners, farmers and cart sellers trying to satisfy their basic needs of food, shelter and security.

 

Booz & Co. says there are currently about 150 existing initiatives that encourage entrepreneurial activity in the MENA region. These initiatives include technology incubators, government (25%), non-governmental organizations (NGOs 62%), networking associations for aspiring entrepreneurs and university programs dedicated to entrepreneurship.

 

The entrepreneurial ecosystem has four success elements: personal enablers, financial enablers, business enablers and environmental enablers.

 

A.      Personal Enablers

 

The first ring in the ecosystem affects the entrepreneur’s individual development, says Booz & Co. These personal enablers include:

 

Mentors/Advisers: Typically other entrepreneurs willing to share knowledge and real-life lessons.

 

Informal Education: Informal education is available through various sources, such as seminars and networking events.

 

Formal Education: Universities around the world offer entrepreneurship courses and programs to nurture a spirit of entrepreneurship.

 

Fewer than 10% of the universities in the MENA region offer entrepreneurial courses and a mere five actually offer a major in entrepreneurship.

 

B.      Financial Enablers

 

These financial enablers or financiers include:

 

Equity Investors: Equity investors include family and friends, angel investors and venture capital funds

 

Banks and SME Financing: Debt financing from banks requires collateral and usually involves a lengthy approval process since start-ups lack a track record.

 

Microfinancing: These lenders offer very small loans to aspiring entrepreneurs in poor regions.

 

Government Programs: These programs include funds, short-term loans, guarantees and other financing initiatives for specific industries.

 

The MENA region’s financial enablers are underdeveloped in particular the network of equity investors, a critical source for start-up capital in the West, which is still nascent in the MENA region, according to Booz & Co. Only 20% of local SMEs have a loan or a line of credit, the lowest percentage of any region in the world; and only 10% of their investment expenditures are financed by a bank loan, also among the lowest worldwide.

 

C.      Business Enablers

 

The third ring in the entrepreneur’s ecosystem consists of professional enablers and includes:

 

Professional Services: This is a large category that includes marketing companies, media associations, consulting firms and accounting firms.

 

Incubators: Incubators provide office space and back-office support for start-ups, usually in return for a nominal fee and/or equity stake in the firm, until they achieve sufficient scale to afford these services on their own.

 

Network Associations: Network associations connect entrepreneurs with experienced business people and/or consultants who serve as mentors or more formal advisers to help the entrepreneur tackle business challenges.

 

Over the past 20 years, about 60 initiatives have been launched within the MENA region to promote business support.

 

D.      Environment Enablers

 

The final outer ring in the entrepreneurship ecosystem involves a diverse group of environment enablers: the regulatory framework, infrastructure, lobbying organizations, prevailing culture and media. Booz& co. reports:

 

Regulatory Framework: Government agencies and private chambers of commerce can stimulate entrepreneurship by simplifying rules and providing incentives for start-ups. However, much more reform is needed across the region in many areas.

 

Infrastructure: The existing infrastructure in MENA countries needs upgrading to improve the start-up and business environment in general. The Internet is used by just 24% of the population in the Arab states versus 79% in the US and 67% in Europe, with average Internet speed in the MENA region (2.73 Mbps) a mere fraction of the global average of 8.69 Mbps.

 

Prevailing Culture:  Most people in the workforce value the stability of a lifetime government job over the excitement of risk taking or innovating. A survey of young people in the Gulf showed that only 9% said that “opening their own business” was their top priority in life.

 

 About Junior Achievement

Junior Achievement Worldwide is the world’s largest organization committed to inspiring and preparing young people to succeed in a global economy, catering to 9.3 million students annually.

 

About INJAZ- Al Arab

INJAZ Al-Arab, a regional branch of JA Worldwide®, is an organization that works with young people in the Middle East and North Africa region providing them with entrepreneurship, financial literacy and work-readiness skills.

 

About MasterCard

MasterCard (NYSE: MA) is a global payments and technology company operating in more than 210 countries and territories.

 

Making Cash Flow- BOX

In an Interview with Michael Bach, President, Middle East and Africa, MasterCard Worldwide, he reveals the inner workings of a regional giant who sees but only one competitor: cash!

“Clearly there is significant growth potential in the payment industry. MasterCard is bringing solutions to displace cash; that is what we do for a living and what we do well. We drive growth into the markets, and the key competitor that we see out there is cash, which we try to displace every single day, simply through payment tools; smart and safe payment tools. That’s our focus,” Miebach explained.

MasterCard’s business plan is to first target banks, their traditional customers and then acquirers and merchants. This 3rd party model has been established for years, and it’s undergoing change. “You have other players entering the payment industry, you have mobile operators coming in, have merchants extending beyond immediate merchant business models into adjacent business models, so that’s a massive trend out there,” said Miebach. Though the B2B model is what drives the company’s growth, the final consumer is ever present on the corporate mindset of MasterCard. “The MasterCard brand reflects security and trust, and there is a relationship that this brand has with the consumer. We work with the market stakeholders that we talked about and all of them talk to consumers. What do these consumers need? We are truly driven by consumer needs and we try to educate on what these needs are and could be. It’s a virtual circle, more like a B2B2C.”

MasterCard is a technology company, in the payment industry, providing payment tools to various sectors including debit cards, charge cards, pre-paid cards, mobile payment, and more. “We are bringing the benefits of payments to society and the economy. It’s about access, transactions, and driving commerce. As far as running a credit card business, that’s what banks do,” clarified Miebach.  In reality, banks are the ones positioned to handle responsible lending to individuals regardless of age and profession. “But generally in the region, regulators have, after 2008, driven regulations across countries in the MENA region, specifically in GCC, to enhance rules that foster responsible lending. And banks are seeking ways to balance their business models to differentiate themselves with payments vis-a-vis the consumer rather than with the credit proposition, with cards that bring mileage, give access to lounges, and other true benefits, to drive value to businesses and consumers.”

Transaction security has accompanied the payment industry early on trying to combat fraud and prevent loss to both providers and end-users. “You have the highest risk of fraud when you are not in the electronic payment world but rather the cash world.  In the cash world, there is no control or transparency. In electronic payments, there are still a set of risks associated, but MasterCard has been driving security solutions that prevent fraud,” affirmed Miebach. MasterCard has pioneered industry leading tools and mechanisms to ensure authentication on the internet. “With a clear set of established rules, MasterCard brings the clarity of rules that are rigorously tested, for each of business, merchant and consumer.”

The payment industry has also been paying close attention to the rise of Islamic banking.  “Islamic finance is the fastest growing sector in this region. We have taken a look at that. We are a payment company with different sets of products, and by definition, a debit or a prepaid card qualifies under Islamic considerations. As we work with banks, their interest in addressing their Islamic customer set, specifically Islamic countries where you have to choose either or, such as Qatar for example, induces us to work jointly in driving their product set, specifically to their customers.”

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