The blog explores how Rwanda has made significant progress in digital financial inclusion through mobile money and digital payments. It also highlights the challenges that remain out of reach for rural communities, women, and low-income populations.

Rwanda’s digital money efforts have reached 85.3% of Rwandans, or 7 million people. The difficult question is whether it works for them, and the case of two Rwandans makes that clear. The first is a salaried civil servant in Kigali who pays her electricity bill, her children’s school fees, and her health insurance entirely through her phone. She never visits a single counter. The second is a young woman who sells vegetables at a weekly market in the Southern Province. She has heard of mobile money and even lives within walking distance of an agent. Yet, she does not own a mobile phone, lacks a regular income, and has never made a digital transaction in her life.

Both women are Rwandan adults. Yet, only one of them is counted among the 85.3% of Rwandan adults who are now digitally financially included, based on the AFR FinScope 2024 Digital Financial Services Thematic Report. This figure places Rwanda among the highest-included countries in sub-Saharan Africa, a remarkable leap from just 46% in 2016. However, behind it lies a more complex story about who digital financial services truly reach and how they do so.

Rwanda’s digital financial inclusion story is one of mobile money. The AFR FinScope 2024 report shows that the vast majority of adults now have access to mobile money services, while banks serve just 1.5% of adults. These mobile money platforms, not bank branches, brought most Rwandans into the financial system. The mobile money services are delivered through basic phones and SIM cards, primarily through providers, such as MTN Rwanda and Airtel Rwanda.

People are drawn to mobile money platforms above all by the need to pay businesses, especially for medical expenses, utilities, and airtime, which top the list. Rwanda’s national digital payment platform is eKash. It enables instant, interoperable transfers across banks and mobile money networks, which makes these everyday transactions seamless.

Government and regulatory action have amplified this momentum. The National Bank of Rwanda’s Payment System Strategy and Law No. 061/2021 mandated interoperability across providers. The Twagiye Kashiresi digital literacy campaign boosted merchant payment volumes, while the COVID-19 period served as an accelerant. Estimates indicate that 9% of Rwandan adults became first-time mobile money users during this period, with an additional 13% who increased their usage.

Yet, access is not the same as use, and use differs from transformation. Rwanda has built a remarkable platform, but the data shows that most people use it primarily for bill payments. The fuller potential of this platform includes digital wage receipts, safe savings, and loan repayment without a branch visit, which remain out of reach for most.

Only 15.4% of adults receive their income digitally. Most of those who do save formally keep their money in a mobile money account, yet informal channels still command a significant share of savings. For many people, especially those with low and unpredictable incomes, savings groups offer a more flexible, accessible, and trusted way to manage money. Village savings and loan associations (VSLAs) are groups that allow small, frequent contributions and quick access to funds when needed, and only 14% of borrowers repay loans digitally.

Rwandans use digital accounts for transactions, but not yet as tools for financial management. This is the access-usage gap, and it matters because the transformative potential of digital finance lies not in the payment itself, but in what the payment can unlock.

The 1.2 million adults who remain entirely excluded have a clear profile. Rural residents comprise 84.7% of this group, and women account for 61.2%. Half of the excluded are young, and 80% have not progressed beyond primary school. Casual workers and street vendors account for nearly half of this group at 44.9%, and most earn irregular incomes with no steady relationship with any financial institution.

The primary barrier is simple and concrete, as 68% of non-mobile money users cite a lack of cell phone ownership as the main reason for not using mobile money. It is not the complexity of service, high fees, or distrust of the system. The network infrastructure around many of these people already exists, with 69.6% of excluded adults living within reach of a reliable Global System for Mobile Communications (GSM) signal. The infrastructure is largely in place, but most excluded adults do not own a device.

Beyond devices, attitude plays a role. Many excluded adults prefer to deal with people rather than machines and prefer cash payments. These attitudes are not irrational preferences, as they reflect trust, habit, and the social fabric of informal financial life, but they are also addressable. 65.3% of excluded adults live within 1 km of a mobile money agent, which means the last mile is shorter and more solvable than it seems.

Exclusion also has a gender dimension, as two out of every three excluded adults are women. The gender gap in digital financial inclusion is present across all age groups and widens with age, which reflects deeper structural constraints. Lower phone ownership, less control over household income, and reduced exposure to formal financial services all play a role.

Kenya’s M-Pesa is the most-cited comparator for Rwanda. M-Pesa turned a payment tool into an economic lifeline in Kenya, with more than 34 million subscribers and 300,000 agent outlets. It enabled microloans, salary disbursement, and integration into government services. The lesson is that coverage and ecosystem depth determine how widely people use a platform.

India’s Aadhaar-enabled ecosystem offers a second model for Rwanda. India simplified the account-opening process and enabled direct benefit transfers at scale by linking biometric identity to financial access. Rwanda’s existing national ID infrastructure and eKash platform are natural foundations for a similar approach, particularly for the Umurenge SACCOs and cooperatives that remain only partially connected to the national payment switch.

Nigeria’s interoperability push shows how cross-platform connectivity expands trust and use among previously excluded populations. Rwanda’s eKash is already a move in this direction. Yet, full extension to savings and credit cooperative organizations (SACCOs) that serve rural communities remains an unfinished piece of the puzzle.

On the technology frontier, AI credit models can use mobile money transaction history to extend small loans to users without formal credit records. Rwanda’s planned CBDC pilots from 2026 offer an entry point to bring excluded populations into the digital system for the first time through transparent government-to-person payments. These tools shift the system from access to utility.

Rwanda’s digital financial inclusion journey has reached an inflection point. The groundwork is largely in place, with the mobile money built, agent networks expanded, and the near-universal access achieved in urban areas. The country should be proud of this next step that goes beyond technology to reach a point where digital financial services become genuinely useful and trusted. These services should reach the vegetable seller in the Southern Province, the rural woman without a phone, and the young casual worker who has never had a reason to go digital.

Affordable devices, liquid networks of well-trained agents in the most underserved zones, and products designed for irregular incomes rather than salaried employees alone must drive the next step. It means fee transparency, local-language interfaces, and patient community-level work to build digital confidence where cash remains the default.

The AFR FinScope 2024 report provides Rwanda’s policymakers, providers, and development partners with a precise map of where the gaps are and who carries them. Rwanda has solved access, and the next step will not be measured by the number of accounts opened, but by the lives changed.

This blog draws on findings from the AFR FinScope 2024 Digital Financial Services Thematic Report, published by Access to Finance Rwanda.

Women are one-half of the world’s population but only contribute to 37 percent of the global GDP. In many cultures, women are expected to prioritize their roles as caregivers and homemakers over their careers or business ventures, and worldwide, women earn 63 percent less than men, yet they spend three times as many hours on unpaid labor, such as housework. This gender gap has several negative consequences, including poverty, hunger, and poor health and have often prevented women from accessing financial services and participating in the formal economy. However, with the advent of digital finance, there is an opportunity to disrupt these social norms and drive economic inclusion for women.

Overcoming Barriers to Access Financial Services  

One of the biggest barriers to women’s economic empowerment is a lack of access to financial services. Traditional financial systems have often excluded women from access to credit, savings, and other financial services. This has limited their ability to start and grow businesses, invest in education, and make other financial decisions. However, digital finance has the potential to overcome these barriers by providing women with access to financial services. Mobile banking and digital wallets can provide women with a secure and convenient way to save money, access credit/loans, and make payments without having to visit a bank or financial institutions in person. According to the Finscope 2020, the financial service facility closest to most of the rural population are mobile money agents and only 1 in every 10 adults in rural areas takes on average less than 30 minutes to get to a bank branch or ATM or a Microfinance Institution.

Empowering Women to Participate in the Formal Economy

Digital finance is empowering women in connecting the dots between women’s financial inclusion and economic empowerment which will enable them to participate in the formal economy, even when social norms may discourage them from doing so. This is important because the formal economy offers several advantages over the informal economy, such as higher wages, better working conditions, and access to capital. i.e.: women can apply for loans digitally, digital lenders can provide women with loans to start and grow businesses from home, using their mobile devices. According to the Finscope 2020 Digital Financial Services Thematic Report, the gender gap was at 9% and needs to be reduced to achieve inclusivity. The gap is mainly amplified by the lack of use cases and awareness about mobile money services, while other people had limitations due to not owning a smartphone and lack of internet connectivity which constrains women from taking advantage of digital financial services, despite owning a mobile phone. The report shows that only 21% of women respondents who own a mobile phone have internet access. This implies a call for telcos, fintech companies, Financial Service Providers, and government institutions to ramp up partnerships and innovative solutions that will address the existing gaps. The McKinsey Global Institute estimates that fully incorporating women into the economy would add $12 trillion to global GDP by 2025[1]. In other words, realizing gender equality enable inclusive development possible. Digital finance helps to break down traditional social norms and provide women with greater economic opportunities.

Promoting Autonomy and Bargaining Power for Women

Digital finance can also help to promote autonomy and decision-making power for women.  It gives women control over finances: it allows women to manage their money, to save money, and to make payments without having to ask permission from a man. In situations where women may face financial abuse or control by a spouse or other family member, digital finance can provide a way for women to have their own accounts and manage their finances independently. This gives women greater control over their financial lives and can lead to greater financial decision-making power.

Understanding women-specific needs

Women’s digital financial inclusion is one of the many powerful levers that can advance gender equality and reduce the gap in terms of financial inclusion. Digital finance has the potential to be a powerful tool for promoting women’s empowerment and economic inclusion. By breaking down traditional barriers and social norms, digital finance can help create a more equitable and inclusive financial system that benefits everyone. However, significant progress cannot be made without truly understanding the realities of women’s lives and their specific needs. In this regard, every four years, AFR and its stakeholders conduct the Finscope Survey to understand the reality of financial inclusion in Rwanda and propose evidence-based recommendations to address existing financial challenges that still hamper financial inclusion. Several thematic reports are produced, particularly one on gender, to deep dive the analysis with a gender lens. The more women access financial services and participate in the formal economy, the more we can expect to see greater gender equality and economic growth in communities. By leveraging digital finance, we have an opportunity to disrupt traditional social norms and promote greater economic inclusion for women.

Over the last decade, the agriculture sector has been contributing 25% of the national gross domestic product (GDP), while the share of agricultural workers in the total workforce stands at 66.4%. The Finscope 2020 Agriculture Finance Thematic Report – a deep dive analysis of the main Finscope 2020 Survey- shows that about 79% of the adult population is engaged in agriculture with 90% of farmers practicing subsistence farming and only 10% engaged in commercial farming. The demographic distribution of farmers is higher in rural areas with 88% of farmers residing in rural settings. Contrary to many other walks of life, more women are engaged in agriculture than men at 56%.

Given the above context, it’s apparent that agriculture is among the major drivers of Rwanda’s economy and will continue to be a national priority.  Indeed, the vision 2050 set objective is for the sector to be transformed from labor-intensive, low productivity, and subsistence-based to a mechanised, highly productive agricultural sector with professional farmers and commercialised value chains.

To achieve this, Rwanda has made financing agriculture a priority for achieving a rapid transformation of the agriculture sector and greater financial inclusion.  

Overall trends in access to finance by farmers

The level of access to financial services and products by farmers is still relatively low despite the increase recorded between 2016 and 2020 as reflected in the Finscope 2020 Agriculture Finance Thematic Report. The report shows an increase in Rwandan banked farmers from 21% in 2016 to 26% in 2020, while the proportion of farmers using other types of formal financial services slightly increased from 44% to 47% over the same period. The usage of informal financial products has decreased from 23% to 19% and this suggests that policy efforts focused on promoting financial inclusion are yielding results, though farmers remain underserved compared to the rest of the population.

The gender gap narrowing progressively

Male farmers have better access to formal financial services, with 77% of them using banks or formal non-bank services, which is 7 percentage points higher than women farmers who are more likely to use informal financial services. Notably, women have become increasingly financially included and the gender gap in using formal financial services (banks and other formal non-bank) has narrowed from 12% in 2016 to 7% in 2020. The proportion of financially excluded women has also decreased more significantly than men, almost bridging the gap in terms of exclusion.

Levels of savings among Rwandan farmers

In 2020, 13% of farmers saved in banks while 35% saved in other formal financial institutions such as SACCOs or mobile money operators. This is significantly more than in 2016 when only 7% of farmers used any kind of formal financial products for their savings. However, a large proportion of farmers still resort to informal savings, even if the share fell from 55% in 2016 to 35% in 2020. Another noticeable change in saving behavior since 2016 is the number of farmers saving money at home which decreased from 26% in 2016 to 2% in 2020.

It is therefore clear that informal savings mechanisms remain important for farmers in Rwanda, and their uptakes are largely driven by the fact that 61% of farmers use savings groups.

Credits accessibility and usage

The Finscope 2020 Agriculture Finance Thematic Report shows that there has been a substantial increase in usage of all sources of credit among Rwandan farmers between 2016 and 2020. Indeed, 76% of farmers have borrowed money in 2020, while only 42% did in 2016. Specifically, the proportion of farmers borrowing from formal financial institutions has doubled from 8% in 2016 to 17% in 2020 including 4% of farmers borrowing money from banks and 12% from other formal institutions (non-bank). However, the main driver of this growth is informal credit, which represented 54% in 2020. It is also interesting to note that only 6% of farmers rely only on their family and friends to borrow money, down from 23% in 2016.  

Risk mitigation mechanisms

In 2020, 11% of farmers reported having used formal insurance schemes, which is a significant improvement from the situation in 2016, when only 4% of farmers used insurance schemes. The introduction of the National Agriculture Insurance Scheme (NAIS) in 2019 by the Ministry of Agriculture and Animal Resources (MINAGRI) in partnership with Access to Finance Rwanda greatly contributed to this improvement. However, most farmers remain excluded from insurance services. Underserved farmers when it comes to risk financing, remain close to 90% in both years despite almost threefold increases in insurance penetration from 4% in 2016 to 11% in 2020.

Challenges standing in the way

As Finscope 2020 indicates, there has been a significant increase in access to and usage of financial services among farmers between 2016 and 2020.  Nevertheless, some barriers still stand in the way of financial inclusion for farmers ranging from infrastructure bottlenecks, where over 60% of farmers live more than an hour away from financial services access points, inadequate access to products and services of financial services providers (FSPs) and high-risk exposure among farmers. However, there are hopes that the National Agriculture Insurance Scheme (NAIS) will narrow the insurance uptake gaps. Other critical challenges include high loan rejection rates among farmers and the low awareness and usage of Digital Financial Services (DFS) among farmers.

Ways to address existing gaps

The above-mentioned challenges facing farmers while financing their activities need strategic solutions to ensure the envisioned ambitions to transform the agriculture sector into a high-value commercial venture are achieved. The Finscope 2020 Agriculture Finance Thematic Report suggests the following policy recommendations.

Resolve infrastructural bottlenecks that constrain access and usage of financial services among farmers – This requires innovation around infrastructural constraints in serving farmers, and an increased focus on agency banking and digital financial services (DFS) will bring financial services closer to farming communities in Rwanda.

Encourage productive borrowing among farmers – While the uptake of credit products is relatively high among farmers, there is a need for tailored products that enhance borrowing for farming purposes among farmers. Purpose-driven financial products such as input credit schemes, warehouse receipts can encourage productive borrowing among farmers.

Prioritize the provision of risk financing products among farmers – The risk exposure among farmers in Rwanda remains close to 90% between 2016 and 2020 which signifies a big gap in risk financing in Rwanda. FSPs such as insurers, banks, and Mobile Network Operators (MNOs) see this as a market opportunity that they can tap into using agricultural insurance-related products.

Leverage informal savings groups to increase agricultural insurance uptake – Savings groups could be leveraged to increase the uptake of agricultural insurance products e.g., the National Agriculture Insurance Scheme (NAIS) by supporting these groups to save up regularly for insurance premiums, raise awareness on the benefits of agricultural insurance and facilitate the enrolment into the NAIS with the support of the Ministry of Agriculture and Animal Resources (MINAGRI).

Establish de-risking mechanisms to enhance FSPs participation in agricultural lending. Income is one of the big constraining factors to agricultural finance in Rwanda.   This demonstrates the need for financial services providers to waive some of the lending requirements (such as collateral) that restrict access to financing among farmers. Government can also consider setting up a guarantee scheme that can cushion FSPs from the heightened lending risks as some of the requirements are relaxed by FSPs.

Read and Download the Finscope 2020 Agriculture Finance Thematic Report

In order to track progress in the uptake of digital financial services, Access to Finance Rwanda (AFR) in collaboration with Key stakeholders conducted the 2020 Finscope survey and produced a Digital Financial Services (DFS) thematic report that assesses the status of access and use of DFS in Rwanda and identifies specific barriers and constraints. The Finscope 20202 digital financial inclusion thematic report also propose policy recommendations and potential interventions to address the identified constraints.

Where does Rwanda stand in terms of digital financial inclusion?

The analysis shows that in 2020, around 66% out of the total adult Rwandan population (7.1 million) are digitally included up from 46% in 2016. This is mainly driven by mobile money access and usage (91%) as well as access and usage of  banks electronic services (9%). The penetration of mobile money stood at 60% in 2020 up from 39% in 2016.From a gender lens, there is still a 9% gap, where 71% of men are digitally included versus 62% of women. Further, the analysis shows that the digital exclusion has decreased by 20 percentage points moving from 54% in 2016 to 34% in 2020. DFS exclusion is high in rural areas compared to urban areas at 43% and 7% respectively mainly due to the lack of awareness and access to digital tools.

Commercial banks and mobile money are the biggest drivers of DFS uptake. Based on the DFS thematic report, in 2020, around 94% of commercial banks and 85% of mobile money operators offered electronic services (e-wallet services). In 2020, around 30% of Rwandans used DFS to facilitate payments, compared to around 19% in 2016. This segment actively uses their financial transactional accounts and self-originates these transactions themselves. DFS payments in Rwanda are mainly made via digital channels including banks’ online transfers, credit /debit / Automated Teller Machines (ATM) cards and mobile money.

Access to digital infrastructure is a key enabler of DFS inclusion

The DFS thematic report 2020 reveals that 86% of adult Rwandans had access to a phone as of 2020, this being a prerequisite to access DFS and usage, compared to 85% in 2016. The number of Rwandans having access to a computer and the internet was comparably low in 2020, with only 18% having access to a computer and 23% to the internet. However, these figures have grown since 2016, where only 13% had access to a computer and 16% to the internet.

Broader challenges that hinder the usage digital financial services

Awareness of existing DFS solutions is vital to ensure usage. From the FinScope 2020, it became clear that while awareness of DFS products is almost equal across gender, there are variations on awareness of some DFS aspects such credit / debit cards (male: 45%; female: 37%) and internet banking (male: 30%, female: 23%). Moreover, the lack of awareness becomes an even bigger problem when comparing urban and rural settings, with the rural population being much less aware of existing DFS products resulting from a low distribution of Financial Access Points (FAPs) in rural areas. This is visible with regard to the awareness of credit/ debit cards, where 70% of men are aware of this service but only 30% of women.

What is needed to further develop the Rwandan DFS market:

Update of Financial Literacy and Training strategy: Low financial literacy is a major obstacle (to greater financial inclusion) and which has a direct impact on DFS usage and financial behavior more generally. Financial literacy programs are essential in the process of enabling the population to make better economic decisions and to consequently generate wealth.

Policy and regulation for Micro Small and Medium Enterprises (MSMEs) to accept digital payments: Merchant payments are part of digital inclusion and are a key enabler for E-Commerce and a digital economy more generally. Making it mandatory for businesses to have at least one digital application channel for rising or receive payment would increase digital inclusion and lead to cashless economy which is part Rwanda’s agenda. The cost of online payments was cited as one of the hurdles for merchants to grow their businesses to reach scale, therefore it is recommended to reduce or remove the costs of digital transactions through: bank charges for customers and small merchants when doing digital payments ,subsidizing costs of low value transactions, and removing/lowering import duties on digital tools including (POS devices and smart phone).

Support policy and regulation to develop an enabling environment for QR codes: QR codes (scan to pay technology) have the potential to significantly accelerate digitisation of economic activities in Rwanda and pave the way for tailored customer services. To attain this QR code, merchant payments have several key enablers and interdependencies: device affordability, internet connectivity, wallet/bank account penetration and merchant distribution, all which must be addressed to increase chances of success

Read and Download the Finscope 2020 DFS Thematic Report

To bridge the gap between key stakeholders in the digital ecosystem, the iHuzo digital platform was developed as a linkage platform that will bring together key stakeholders in one place. MSEs and iWorkers can sign up, get matched to relevant digital platforms of their choice, and be seamlessly onboarded to begin selling online. They can also engage with other players such as digital financial services providers while at the same time receiving the information and training, they need to succeed online.

As of December 2021, the iHuzo project has onboarded 1,935 MSEs on digital platforms and 1,207 iWorkers onto different labor platforms operating in diverse sectors of the economy.  Moreover, to address the challenge of a lack of digital skills, the project has trained over 1,274 MSEs equipping them with the understanding of digital commerce benefits to their businesses and skills such as marketing and sales. The project also aims to train 2,000 iWorkers with digital marketing and sales skills that will help them find jobs online and succeed as digital workers. A small survey conducted to assess the impact of the project indicates that onboarded MSEs and iWorkers have shown improvements in how they manage online presence, awareness, and digital skills.

The success of the digital platforms requires partnership and collaborations across different players in the Rwandan digital ecosystem.

“The iHuzo project was born from the need to boost the number of businesses selling their products and services online.  The project will highly benefit Micro and Small Enterprises, and iWorkers (digitally connected workers with smartphones: gig workers, e-lancers, e-commerce merchants or sellers.)”  

Jean Bosco Iyacu, CEO of Access to Finance Rwanda (AFR)

What are the Existing Initiatives to Promote Digital Commerce?

In October 2021, iHuzo project brought together key stakeholders, both public and private, in the digital commerce ecosystem in Rwanda to discuss the challenges MSEs and iWorkers face, and the role that digital platforms/E-commerce can play in enhancing service delivery, innovation, and financial growth of MSEs and iWorker in the country.  Over 120 participants from various Government Institutions; Ministry of Trade and Industry (MINICOM), Ministry of ICT and Innovation (MINICT), Rwanda Development Board (RDB), the National Bank of Rwanda (BNR), Rwanda Internet Community and Technology Alliance (RICTA), Rwanda Information Society Authority (RISA,), etc.) and financial service providers (MTN Rwanda, Equity Bank, Bank of Kigali, etc.), as well as development partners (GIZ, UNCDF, etc.) who actively engaged with panelists.

The convening came at an opportune time, amid tremendous growth of digital commerce in Rwanda, particularly accelerated by the COVID-19 pandemic. In her remarks, Paula Ingabire, Minister of ICT and Innovation (MINICT) noted that there has been unprecedented growth in e-commerce due to the COVID-19 pandemic.

“Since the COVID-19 outbreak, we’ve all seen how selling and buying using online means helped us navigate amid the pandemic. However, the industry is facing a number of challenges that need to be addressed for better service to be delivered.”  

Paula Ingabire, Minister of ICT, and Innovation

During the pandemic, consumers also embraced digital commerce, allowing businesses to continue operations remotely. A research conducted by AFR with support from BFA Global in early 2020 on the perception of e-commerce by Rwandan MSEs and consumers, indicated that consumers’ engagement with e-commerce platforms significantly increased in Rwanda during the COVID-19 pandemic. 53% of the survey respondents expressed willingness to keep using e-commerce platforms due to the time savings and access to a wider range of goods and services.       

It was promising to learn through discussions at the convening that key stakeholders are working to expand digital commerce in the country and address existing challenges.

Alex Ntare, the ICT Chamber CEO, shared with participants the progress of iHuzo platform, highlighting key features and functionalities of the platform that come to address challenges such as trust in the quality of iWorkers, matching platforms with qualified resources, and more.  

The Government of Rwanda through the Ministry of Trade and Industry is putting together an e-commerce policy and strategy to regulate the industry and encourage entrepreneurship. RDB has focused on digital skills for iWorkers through partnerships with numerous international players such as GIZ, Alibaba, and FAO. Other positively impactful initiatives undertaken by the government include incentivizing Mobile Network Operators (MNOs) to make internet infrastructure accessible and affordable through zero-rating and offering free smartphones and creating tech challenges and hackathons for innovators to build expertise and provide mentorship.

Digital financial services (DFS) players such as banks and fintech companies are developing products and services for MSEs and iWorkers while changing their once rigid policies to consider the needs and challenges MSEs and iWorkers face.

For example, Mobile Network Operators (MNOs) have improved access to payments and other financial services and products, especially at the last mile, lowered mobile money commission charges for merchant payments, scrapped transaction charges of small amounts below 2,000 RWF up to 4 times in a day, and is planning to diversify offerings to microinsurance and loans for both merchants and agents.

To serve the MSEs segment, Equity Bank has created a department dedicated to MSEs, simplified account opening and done away with associated costs, expanded agent network, intentionally focused on women and youth, diversified loan portfolio, and come up with creative ways of determining the creditworthiness of MSEs

Despite the benefits of digital commerce discussed, there is still a long way to go to expand digital commerce and the livelihoods it generates. This is due to some challenges that are still slowing down the use of digital commerce platforms like:

• Access to capital for both iWorker and MSEs (considering the iHuzo project was a pilot to test if both MSEs and iWorkers can get loans using Data: Cash Flow lending)

• Education for the demand side of the e-commerce ecosystem (iHuzo project is only supporting on the supply side)

• Banks still charge a lot of money for digital payments (Visa, Mastercard). For instance, whenever a transaction is made, the bank takes around 4% of the fee considering e-commerce marketplaces are paid between 8% and 10% on commission. So, if the bank takes 4 %, the platform remains with only 6% which is likely to make the business unprofitable.

     Going Forward

The ongoing initiatives are necessary and important for the advancement of digital commerce in Rwanda.  Still, we identify three possible ways to further catalyze the development of the sector.

• Building the capacity of e-commerce platforms. The growth of digital commerce is inevitable; it is disruptive and has the potential to generate positive outcomes. However, it will take time to see the impact. E-commerce readiness in Rwanda is still low. There is a limited number of platforms to absorb iWorkers and MSEs of different skills and educational backgrounds. Capacity building of digital platforms is needed to promote the onboarding and success of MSEs and iWorkers. This means capital investments in digital platforms require building capacity around skills processes (i.e., Onboarding) and technology.

• Policies around e-commerce need to be more enabling. When asked about challenges they face, MSEs and iWorkers mentioned high commissions, unclear tax policies, consumer protection issues, etc. These challenges require policy interventions to be addressed. Hence, policymakers need to continue working together with industry players to find effective ways of addressing these challenges.

• Engage in more collaborations to leverage existing efforts and create synergies. As discussed above, different stakeholders are engaging in initiatives to address challenges in the ecosystem. While the initiatives are much needed, some of the efforts can result in duplication of efforts. There is a need for stakeholders to have a continuous dialogue to share insights and learnings.

On the 3rd of April 2020 the Savings Groups Practitioners Forum in Rwanda met through a webinar hosted by Access to Finance Rwanda (AFR) to discuss some of the effects they and their members or clients were facing as a result of the spread of Covid-19.

The Rwanda Savings Group Practitioner’s Forum began in 2013 driven by a need by institutions that promote Savings Groups, both local and international, for a forum where they could share learnings. It meets quarterly and has the support not only of AFR but also of the Ministry of Finance and Economic Planning (MINECOFIN) and the National Bank of Rwanda (BNR). One of the key successes of this Forum has been the creation of the Rwanda Savings Group Map hosted by the BNR https:// sg.bnr.rw. Efforts to ensure it stays updated continue.

Savings Groups and microfinance institutions remain key players in Rwanda’s financial sector serving a majority of the population. COVID-19 poses serious risks both health and economic because of restrictions on movement and gathering. As such effects of the pandemic are deeply felt by the clients and members of these institutions. Some of the key takeaways from the Forum’s meeting are shared below:

1. Clear and timely communication

There is need for the institutions serving these clients to communicate clearly on health and safety and the conduct of business.

• Health and Safety: Savings Groups rely largely on the physical assembly of members and the exchange of cash, which are both clearly restricted now. The health and safety of these members is a priority and thus the responsibility on the part of the promoters and MFI’s to guide members on holding meetings (where they occur) in a healthy and safe environment.
• Conduct of business: Members may struggle with issues such as access to their savings and the holding of significant sums of cash in the houses of a group official who is as financially constrained as they themselves. Many of these groups do keep money in the SACCO’s but withdrawal and deposit has to be physically managed. Some groups may want to share out while others may want to retain their money within the groups as a future reserve. A discussion and check up with group leaders at this time is important.
• Use appropriate communication channels to reach members such as radio, WhatsApp, SMS, Voice can be an added but needed expense for the SG promoters.
• Working closely with Village Agents to ensure they themselves are well informed and can guide the groups.
• Aligning messages to the Ministry of Health (MoH) and other Government entities to ensure that messages are correctly understood.
• Common Guidelines are useful. Care International has developed Covid-19 Guidelines for Savings Groups available on their website. These can be shared widely.

2. Connecting members to other support structures

Members of SGs need to be aware of other available support structures such as in-kind food support by Government or well wishers and continued agriculture extension services available. During the lockdown agriculture production, manufacturing, sale and distribution of produce continues and as such many of these members will be busy in the farms or factories.

3. Operational challenges experienced by MFI’s on collection of payments and disbursement of loans

• Collection of loans is conducted through the group meetings with visits being done by the loan officers. Disbursements are also made in the presence of all group members since they guarantee these loans collectively. The collection and disbursement of loans is now challenged with some members failing to pay. This will have an effect on the Portfolio at Risk (PAR) of these institutions
• The presence of the Loan Officers at group meetings is a critical success factor for group based lending mechanisms. The ability of the Loan Officer to still connect with clients needs innovative thinking and may introduce increased costs to the MFI such as mobile phone charges.
• The ability to pay by the clients is a key concern since the businesses they operate may be constrained or not operational at the moment. What can the MFI do to support the Small and Micro Entrepreneur (SME) that they serve? This is another discussion that needs leveraging other initiatives on SME post Covid-19 support in the country.

4. Lack of digital financial service offerings by the MFIs and SACCOs

• Many of the MFIs and SACCOs, more especially the SACCOs, do not have automated or digital money channels through which to serve their clients. This is a key concern and a major challenge on the operations of the institutions and the clients themselves. Initiatives aimed at speeding up digitalisation of processes and payments within these institutions remain a priority.
• It was noted that Savings Groups that had digitalised their processes were able to continue operating and serving their members. These groups are however a small minority and questions have risen on whether it is practical to try and digitalise the operations of others who are willing during a lockdown period. This in itself presents unique challenges. Partnerships with Fintechs provides opportunities for the growth of Savings Groups.

5. New investments in building the capacity of the institutions and staff

• Institutions are now faced with a major rethink on how best to serve their clients. The lockdown provides an opportunity for institutions to train their staff on new skills that they will need now and during the recovery phase. Leveraging on online training opportunities and partnerships at the moment is wise.
• Investment in computerised systems, online working modes, coordinated communications are just a few of the key areas that MFIs and SACCOs must focus on.

6. Liquidity support for MFIs and SACCOs

• Due to repayment challenges by the clients there will be need for liquidity support for the MFIs and SACCOs. The Central Bank has availed support to banks and an extension of similar facilities to the MFIs and SACCOs will be useful. MFIs and SACCOS need emergency liquidity facility during and after this crisis.
• A careful review of the loan portfolios however is crucial so as to ensure any new or structured lending is well informed to avoid the deterioration or collapse of these important institutions.

7. Diversification of MFI loan portfolios

Participants pointed out the need for diversified loan portfolios well balanced between individual and group based lending. Most MFIs solely dependent on group lending are hard hit with some suspending operations at the moment.

8. Support through industry associations

Support through industry associations like AMIR is important at a time like this since they are able to collate the concerns of sector players and remain a voice for their members.

9. Standard Guidelines from the MFIs

Standard Guidelines from the MFIs to the SGs that they serve on what to do during the Covid-19 period could be useful as it would ensure all branch staff or loan officers are communicating the same message.

Fast forward to the 18th of March 2020 the National Bank of Rwanda announced various measures meant to mitigate the negative economic impact as a result of the COVID-19 pandemic. This was a pre-cursor for an impending lockdown that followed a few weeks down the line. These are part of a social distancing approach that is crucially important in reducing the spread of coronavirus and thereby helping to “flatten the curve” resulting from new infections in a bid to make it possible for health facilities to cope with the increase in activity. In hindsight, the move by the Government of Rwanda led by the National Bank with some of its partners including Access to Finance Rwanda (AFR), to drive the economy towards mobile commerce and digital financial services would not have come at a better time. It is now poised to help cushion the country against the unintended consequences of an economic shutdown.

The COVID-19 outbreak is a tragedy that will have widespread and long-lasting implications for humanity and the global economy. The rapid and global spread of the deadly new coronavirus caught households, business leaders, investors and policymakers off guard with a potential for disruptive economic consequences.

The History of Global Outbreaks and World Economy

Plagues and epidemics have ravaged humanity throughout its existence and have always been inevitably co-related with economic progress. The Black Death carried off one-third to two-thirds of the population of Europe, it took them a while to recover. The “Spanish” flu of 1918 was one of the deadliest pandemics in human history, a third of the world’s population was infected, 50 to 100 million people died and the global economy shrank by 5%. According to a recent article by the economist “Interconnected trade networks and teeming cities have made societies both richer and more vulnerable, from the empires of antiquity to the integrated global economy of the present”. As history indicates the same trade links which spread a pathogen can themselves be undone by its effects. During the Roman Empire, a high degree of specialization and trade lifted incomes to high levels however the same links facilitated the spread of the disease.

In a recent article by The Wall Street Journal “Global Outbreaks Are Likely to Increase”, Epidemics of infectious diseases have become a regular part of the global landscape in the past quarter-century, partially due to economic trends including urbanization, globalization and increased human consumption of animal proteins as society becomes more prosperous. It’s postulated that an old rule of thumb in pandemic research was that such events happened about three times every century. And as a highlight so far this century, the world has already confronted an array of viral scares, including SARS in 2002 and 2003, the Swine Flu (also known as H1N1) in 2009, MERS in 2012, Ebola in 2014 to 2016, Zika in 2015 and Dengue fever in 2016.

Different experiences with pandemics can be an indicator of future economic divergence, historically these have been shown to guide the direction societies take in charting their way to prosperity. For the past few years use of digital applications has been at the top of the list of technologies being adopted by individuals and organizations however the coronavirus pandemic is pushing digital transformation to the front of the line. The value of digital channels, products and operations is immediately obvious to companies everywhere right now as it may force firms to embrace new technologies in order to operate while warehouses and offices are empty, with lasting effects on growth and productivity.

Embracing Digital Financial Solutions – The Case of Rwanda

The non-bank financial sector, particularly mobile money, has been the key driver of formal inclusion.

As they say, “necessity is the mother of invention,” and coronavirus (COVID-19) is forcing many people around the world to rethink how they carry on activities in their daily lives from work, schooling and entertainment. This is becoming even more relevant and an everyday fixture in response to travel bans, school closures and avoiding gathering in large crowds as part of social distancing. Social distancing is key to limiting the spread of the virus and in response, many people are turning to digital tools to maintain a semblance of normality. Rwanda’s experience has not been very different from its neighbors, however, the growth in payment digitization is mainly due to numerous policy commitments, including the goals of the Government to shift to a cashless economy and to achieve a nationwide formal financial inclusion level of 100 per cent by 2020. With those goals in mind, the Government has joined forces with Access to Finance Rwanda (AFR) and other partners to formulate national strategies and implement regulatory reforms to foster payment digitization and financial inclusion.

These new technologies and innovative business models are bringing about a transformation of the financial services industry in Sub-Saharan Africa, with low-income people, farmers and small-scale entrepreneurs getting an opportunity to be financially included while at the same time being involved in the economic development of their countries. These Innovations in digital technology have created new and exciting opportunities to reach unbanked and underbanked low-income customers in emerging markets as well as developed countries. Traditionally, these customer segments have been considered too risky and too poor to be of interest to banks and insurance companies however this is changing. Mobile wallets and mobile money transfers, peer-to-peer and other alternative lending platforms, pay-as-you-go asset finance and digital micro-credit are examples of recent innovations that are reaching hundreds of millions of consumers and small businesses. These innovations are radically changing the financial services landscape around the globe.

As the effects of the COVID-19 pandemic continue to reverberate, banks and other players in the financial services sector have a role to play as systemic stabilizers. The measures prescribed by BNR (The National Bank of Rwanda) are expected to help the economy to cope with the adverse effects from coronavirus pandemic whose impacts are likely to be felt for a while to come. Part of the conditions is to ease the loan repayment challenges through a restructuring of loans by banks for borrowers facing cash flow challenges as a result of the pandemic. Additionally, the Central Bank increased its liquidity support to the banking sector through the introduction of an extended lending facility, reviewing of the existing treasury bonds rediscounting window and the reduction of the reserve requirement ratio by 100bps from 5% to 4%, all these were in addition to the existing facilities.

However, the more exciting change was the policy support around encouraging the use of digital channels and contactless mobile payments. In cases of a global health pandemic spread by human contact as we are experiencing now, the dominance of mobile money in the country provides a policy tool to encourage digital versus physical contact on a wide scale through financial transactions. And in addressing these challenges, all charges for transfers between bank accounts and mobile wallets for both pull and push services were dropped. All mobile money transfers will also attract no charges, as well as zero merchant fees for all contactless point of sale transactions. The limit for mobile money wallets was also increased from FRW 500,000 ($ 542) to FRW 1,500,000 ($1,628) for Tier 2 customers and from FRW 1,000,000 ($1,085) to FRW 4,000,000 ($4,343) for Tier II customers. The above changes will be in effect for a period of 90 days.

Rwanda has 4,700,987 mobile payment subscribers with 378.8 million transactions as at the end of 2019 according to the National Bank of Rwanda’s monetary policy and financial stability statement released on 25th Feb 2020. The country’s mobile penetration is reported at 78.8% at the end of 2018. Banks offer platforms for Internet banking (via the bank’s online website) and mobile banking (via the bank’s mobile app or Unstructured Supplementary Service Data [USSD]) to their customers. According to a report by UNCDF as at the end of 2017, there were 52,020 Internet banking users in the country, who collectively performed 339,522 transactions amounting to RFW 1.42 trillion (US$1.56 billion); meanwhile, 1,158,944 mobile banking users were performing 3,906,642 transactions totalling RFW 36 billion (US$40 million). The low number of subscribers and frequency of transactions, in comparison to the transacted amounts, suggests that Internet banking transactions are predominantly performed by businesses, while most mobile banking transactions are individual payments. Still, mobile money constitutes the largest proportion of transactions initiated by digital instruments in Rwanda. The number of registered mobile money customers at the end of 2017 was 9,079,983. During 2017, the mobile money industry facilitated over 251 million transactions worth RF1.38 trillion (US$1.52 billion).

Another interesting phenomenon has been the entry of Fintech start-ups into the landscape as payment aggregators with infrastructure that supports card-based and mobile payments. These are offering competitive services including bill payments, airtime top-ups and merchant payments. The change in the fintech start-up landscape is positively correlated with regulatory reforms in the payment sector and the launch of ICT-focused government policies and they have increased from 5 in 2010 to 44 in 2019 a 780% growth according to a UNCDF report. The Fintechs can broadly split into 1) CORE Fintechs that provide financial services such as payments/remittances, lending/financing, savings and insurance products directly to end-users and 2) ENABLING Fintechs that provide technology/business solutions primarily to financial institutions to enable the delivery of financial services. They do not offer their own financial products and services to end-users.

Because of the efforts highlighted above, the proportion of the adult population that is formally financially included increased from 42 per cent in 2012 to 68 per cent in 2016, while total financial inclusion (both formal and informal) stood at 89 per cent in 2016. The non-bank financial sector, particularly mobile money, has been the key driver of formal inclusion. The number of mobile money customers grew eight times, from about 1.4 million subscribers in 2012 to 11.1 million subscribers in 2018; meanwhile, the volume of mobile money transactions grew from 22 million to nearly 300 million and the value from RFW 162 billion (US$178 million) to almost RFW 2 trillion (US$2 billion). Moreover, the use of retail e-payments grew from 3 per cent of the gross domestic product in 2011 to nearly 27 per cent in 2017. The country is aiming to reach 80 per cent by 2024.

While the global adaptation to COVID-19 will take much longer, perhaps several years, each country’s financial services industry will need to make sizable adaptations to their operations in order to survive without permanent impairment to their business crises of this magnitude. Financial services are the lifeblood of an economy, enabling households and businesses alike to save, invest, and protect themselves against risk. The effects of the Covid-19 pandemic seem to have many layers unfolding in front of our eyes as our normal way of life gets disrupted and political leaders, financial institutions, and global governance structures are being severely tested. However, one thing that is clear, the private sector has a huge role to play as Governments, Central Banks and the WHO will not defeat the coronavirus alone. From a strategic perspective, businesses that can shift technology capacity and investments to digital platforms will mitigate the impact of the outbreak and keep their companies running smoothly now and over the long term.

Despite the challenges that come with this pandemic, it also presents an opportunity: more sophisticated and flexible use of technology, less polarization in the midst of these unprecedented changes. Digital finance offers the perfect solution; individuals and companies can have access to payments, savings, and credit products without ever stepping into a banking hall. Digitization turns a smartphone into a wallet, a chequebook, a bank branch, and an accounting ledger, all in one. The gradual shift in consumer attitude and growing demand for anytime-anywhere access to services has characterized some of the changes in the banking sector in the recent past and will have even more profound impact on the industry business model.

The value of digital channels, products and operations is immediately obvious to companies everywhere at the moment. It is also a wake-up call for organizations that have placed too much focus on daily operational needs at the expense of investing in digital business and long-term resilience. Businesses that can shift technology capacity and investments to digital platforms will mitigate the impact of the outbreak and keep their companies running smoothly now, and over the long term. Those companies that are able to use technology well to keep going and rethink their business model for the future by fast-tracking digital transformation will be ones ahead of their competition. There will be a need for financial institutions to reach out and diversify from the traditional models of operation towards technology-driven service provision and one such approach is through collaboration between microfinance banks and Telcos in rolling out products and services that boost financing of Micro Small and Medium Enterprises (MSMEs. This is happening to some extent, however, the efforts should increase so as to foster the development of more innovative products.

As social distancing becomes the new norm and people stay at home to contain the virus, their unmet needs for daily supplies will most likely increase their digital banking or online shopping. Use of contactless technology and digital wallets will also increase as these tools can keep consumers away from devices that can be potential platforms for the new coronavirus. The lack of friction and physical contact in digital payments not only accelerates commerce but will also keep the economy moving during these challenging times.

These showcase opportunities and how the financial sector players can adapt their business models during the crisis in order to continue serving their customers or bank new ones. The SME’s are the economic engine and their contribution is needed the most. Digital financial services have re-defined service delivery within the industry through offering even greater access to mainstream banking services, especially to the underbanked.

Access to Finance Rwanda’s (AFR’s) core is to stimulate and continue supporting the development of the financial sector in Rwanda through removing systemic barriers that hinder access to financial services by putting the low-income people particularly the rural poor and women at the centre of its interventions. AFR supports the development and provision of financial services including savings, credit, insurance, payments and remittances.

We are all collectively on a journey and we are not sure how long the crisis will persist, but it carries with it a disruption of our way of life, both economically and socially. The path ahead is a precarious one driven by uncertainty from the pandemic combined with a unique blend of resultant shocks to both supply and demand in the global economy. Building resilience by adopting new business models in the private sector will be key for our economies to survive in the long term.

There exist enough opportunities in all sectors of the market brought about by these forms of unprecedented disruption. They have the potential to give rise to new markets for households and businesses to manage their day to day operations and deal with risk as they contribute to inclusive economic development. A good number of our micro, small and medium enterprises are operating under the informal sector and may be the hardest hit by the disruption caused by the pandemic. However, giving customers a choice in performing financial transactions through new and innovative ways assures them continued access to essential goods and services and in effect gives a lifeline to our vulnerable groups.

These shifts in customer needs and requirements in line with changes in the operating environment underpin the need for the financial services sector to diversify away from the traditional models of operation towards being technology-driven thus serving their economies and markets better.

While bank account usage among the adult population surveyed remained low in in 2016 (26% of adults), Small and Micro Enterprise (SME) owners actually had a higher level of usage of bank accounts compared to other adults. Of the SME’s surveyed 43% used banks compared to 23% for non-SME owners. The banks remain an important financial access channel for small and micro enterprises.

Other than banks there are other formal institutions in use (mobile money, Umurenge SACCOs, MFI’s, insurance companies). There was no difference between SME and non-SME owners in the use of these non-bank formal institutions (42% for both). The marked difference was in the use of banks. In other words, bank account ownership was important for small business owners.

Tailored financing by the banks therefore remains a critical factor for SME growth in Rwanda.

Mobile money account ownership was the game changer in moving access to formal financial institutions between 2012 and 2016. A 32% upward movement! For SME’s, ownership of a mobile money account was a key differentiator from the normal Rwandan adult. The SME’s with mobile money accounts were 58% of the adult population while non-SME’s, 31% a 27% difference.

In thinking through revision or abolition of mobile money transaction fees there must then be a focused analysis on implication on business vis a vis the implication on other normal users.

Where do they borrow? This was the interesting part. They actually borrowed either from other formal institutions (22%) or informal institution (46%) a total of 68%. Bank borrowing was only 10%.

Measures taken to restructure loans and support financial institutions must be cognizant of where the SME source credit so that desired results are achieved.

The informal institutions, largely the Savings Groups (SGs) remain a key source of access to finance for Rwandans. Of the adults surveyed in 2016, 72% used informal mechanisms (whether or not they also used formal channels). They are largely rural, cash based, operate as groups who meet physically. Clearly the 1-meter distancing and handling cash COVID -19 prevention measures, would be a real challenge! Initiatives including those of AFR to digitalize operations and adoption of new technologies by the groups has been slow to take off.

What does it mean for the SME owner if the group does not meet? Food for thought.

We will keep engaging you as actors in Rwanda’s financial sector ecosystem on what the data says and what we could all do.

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