Wednesday, December 7, 2011

Visa Enters Partnership to Expand Into Rwanda

Africa has been identified as a high-potential market for expanding financial services. The Rwandan economy is expected to grow 7 percent this year; the sub-Saharan region is expected to grow 5 percent. Many private sector financial firms including Visa, Mastercard, and EcoBank Group (Togo) are partnering with the Rwandan government to rapidly create/expand access to “cashless commerce.” In the Visa deal, a partnership with Rwanda’s central bank and a new office in Kigali will allow Visa to process transactions in Rwandan francs. The firm will expand its network of ATMs and businesses that accept Visa cards. Additionally, it will train Rwandan officials in financial management of payments between the government and its vendors and employees.

Visa and several other financial service firms have sought to capitalize on emerging markets. In the HBR spotlight, Strategies That Fit Emerging Markets, the authors emphasize the need to diagnose the institutional contexts of a region/market before crafting strategy. Specifically, the business model must adapt to considerations of the political and social environment, the labor and capital markets, and the product markets. With the entrance of Western concepts of financial management, credit, and markets, firms like Visa are completely altering the African capital markets. Their strategy going forward must appropriately address cultural differences, infrastructural weaknesses, and geo-political issues, all of which significantly impact the business environment.

There have been several initial indications that this strategy will be successful and likely profitable for foreign private sector firms. However, one true measure of success that has not been observed is the ability of this new capital to generate positive, sustainable reform in the African private sectors that will be led by local financial leaders. By improving the African capacity for new forms of commerce, Visa is creating a long-term competitive advantage in its relationship with and knowledge of the Rwandan financial systems and public sector. It must continue these relationships while crafting a unique market, accessible only to Visa.

Do you believe that expanding financial services into Africa is a profitable strategy? What difficulties may arise in tapping this new market?


Article Link: http://online.wsj.com/article/SB10001424052970204770404577078462533519278.html

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