Opinion: How innovation in digital payments is enhancing financial inclusion in Rwanda

By Dr Jaya Shukla –

The Government of Rwanda is encouraging the masses, businesses and organisations to embrace digital payment systems to drive its goal of achieving a cashless economy.

Already, most government services, including passports, IDs, birth or death certificates, are paid for online, while the business community must file tax returns online. These initiatives have also already made it easier to move and manage money. In short, digital payments are making financial services more universally affordable and accessible and, therefore, have the opportunity to drive financial inclusion in developing countries.

Financial inclusion is an important aspect in the drive toward poverty eradication and economic development. Different studies indicate that there is relationship between financial inclusion and human capital formation. When people are financially included, they are more likely to start new businesses and invest in education. Research also indicates that financial inclusion has a positive impact on economic growth and can help reduce income inequality.

As part of its Vision 2020 development plan, the Rwandan government has set an ambitious goal to increase the number of adults who are financially included by 2017 to 90 per cent by 2020. Access to financial services in Rwanda is currently driven by two major types of services – Savings and Credit Co-operatives (SACCOs) and mobile phone-based financial services known as mobile money transfer services provided by MTN, Tigo and Airtel. The service was first introduced in 2010 by MTN. Thereafter, Tigo and Airtel introduced their own mobile money products in 2011 and 2013, respectively.

With time the financial sector jumped on the bandwagon, introducing mobile banking products. Bank of Kigali and Urwego Bank partnered with mVisa to introduce mobile banking products in 2013. Equity Bank, BPR and Bank of Kigali have invested in building their own USSD-based mobile banking services. Ecobank is slowly phasing out its physical branch network as it moves to digital banking, which is revolves around mobile banking and other digital financial platforms.

Banks like KCB and Equity Bank can now provide soft loans to customers on their mobile phones, without need to go to the financial institution to fill forms or talk with loan officers. Telecom firms also offer subscribers similar loan products.

In addition, banks and mobile money providers have made efforts to form bilateral agreements to facilitate account to account (A2A) transfers as well as ATM withdrawals to maximise benefits and increase customer base.

To drive customer adoption and usage, service providers have been introducing beyond-payment products and services. Again, banks and telecom companies are now diversifying products and mobile money services in order to widen customer base and they are competing both in terms of prices and products.

The former Tigo and Urwego Bank launched an interest-bearing savings account on their mobile wallet. Airtel introduced a credit product which provided customers loans with a biweekly term for repayment and a 10 per cent facilitation fee. MTN has launched both insurance and school fees payments, and was also first to introduce P2G collection services in collaboration with the government.

Financial inclusion through mobile money services has become popular in African countries. The increased access to cell phones by the unbanked Africans is the most cost-effective and economically efficient method of providing financial services to the majority of the African populations.

One of reasons for success of mobile payments is low transaction costs. In Kenya M-Pesa was routinely one-third to one-half as expensive as alternative systems. Lower costs directly translate into money the poor can keep – in Kenya the amount of money remitted increased when transferred using M-Pesa compared with traditional forms of remittances. Conversely, where transaction costs are high, as in Botswana where the cost per transaction is a minimum of 8 pula ($1.07), mobile money has been slow to take root.

In Rwanda such innovative products with low-cost of transaction have widened the approach to financial inclusion. With diversified products and services under mobile money scheme it is possible to cover different group of population with different economic backgrounds.


Mobile money transfers are playing an important role in financial inclusion in Developing countries. Mobile money transfers and savings are much safer and low cost as compared to banking transactions.

To make them widely accepted by population there is need for educating, training and informing people about usage technology and also precautions needed. Again innovation in mobile money transfers will help in diversification, and enhancing coverage to more population.

While the role of the state should be to develop supportive regulatory frameworks; build the financial infrastructure and conduct financial literacy programs, private sector role would be to create operators that can provide good quality financial services at an affordable cost to the majority of Africans.

The writer is an Economist and Consultant based in Kigali.

Views expressed are of the writer and do not represent those of Business Times.

Source: The New Times

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