Just over a quarter of the population have bank accounts, a situation largely attributable to low reach of most commercial banks as focus is mainly on major towns and provincial cities. Less than 30 per cent of Rwanda’s adult population is formally banked, according to recent research by FinScope, giving bankers huge opportunities if only they cast their nets deeper and more creatively.

However, this could soon change as many of the banking sector players deploy digital financial services and agency banking services to tap the hitherto ignored and unbanked masses up-country. The development also seeks to help improve service delivery and support campaigns to encourage use of electronic financial devices by the population. In fact, from the fourth quarter of last year to last month, leading banks have tried to outdo competitors announcing installation of key ecosystem and infrastructure to drive the move toward digital financial services.

These efforts have been supplemented with public awareness campaigns by the government on benefits of developing a savings culture and use of formal banking services, which also seeks to mobilise more deposits for on lending to the private sector.

Why promote digitisation in financial sector

Maurice Toroitich, the managing director, KCB Bank Rwanda, said e-financial services allow government save money by reducing leakage in spending and tax revenue collection.

He noted that more banks, including KCB Bank, are increasingly turning to information and communication technologies (ICTs) to improve service delivery, expand their reach, as well as deliver customer-centric products.

Toroitich, also the chairman Rwanda Bankers Association, said these developments will make it possible for clients to, for instance, apply and receive micro-credit and on their mobile phones.

Sanjeev Anand, the BPR chief executive officer, said embracing ICTs will enable banks to serve the not-so-attractive market segments easing and cost-effectively.

This, he added, could spur some lenders to ensure competitiveness and efficiency in service delivery. The recent wave of innovations and product launches by banks have so far allowed customers to check their account details on their mobile phones, pay online bills and transfer money from their account to their mobile wallets and vice versa, file tax returns or pay bills and schools without going to their banks, making transaction faster, safer and more convenient.

From Bank of Kigali, I&M Bank, KCB Bank Rwanda to BPR and Equity Bank Rwanda, all the top lenders are in cutthroat race to deploy ICT facilities to support ambitious plans targeting up-country clients. The banks have also embraced e-devices like debit or credit cards to create convenience for customers, ease service delivery, deepen financial inclusion and support push for cashless economy to become more competitive.

Innovations by the telecoms sector, including mobile money transfer services that allow users to send and receive money from within and across the region, micro-credit facilities by Airtel Rwanda and Tigo, and other facilities like Tap and Pay by MTN Rwanda, add to the mix as drivers of e-financial services and help ease access. This is besides the fact that they are key enablers of a cashless economy.

John Rwangombwa, the governor of the National Bank of Rwanda, said through digitisation, banks are able to enhance service delivery besides bringing services closer to users, thus saving costs and time.

The governor added that e-financial services will play a key role in bringing onboard the hitherto excluded and underserved segments of the population, as well as "help banks deliver services in an affordable, secure, and convenient way”.

"Digitisation of financial services takes away the need to stand in queues which saves time. Customers are also able to transact on the move or from the comfort of their home through the Internet or their mobile phones,” Rwangombwa said.

Rwanda aims to become a services and digital hub by the year 2020, with information and communication technologies (ICTs) driven services at the core of all segments of the economy.

The governor said government business is currently done electronically, including e-payment of bills and taxes.

"There are policies in place that encourage digitisation financial services like payments…We continue to support the private sector, especially financial institutions, to embrace ICT to increase financial inclusion,” he said.

More opportunities

"Through digital financial services, Rwandans will be able to unlock productivity and investment potential, reduce poverty, empower women as well as help build stronger institutions and corporate governance, while providing a profitable, sustainable business environment, Damascene Niwenshuti, a researcher and economist based in Kigali explained. Niwenshuti added that ICTs help banks reduce inefficiencies and unlock significant productivity gains.

"Developments like automation and digitisation provide customers self-service platforms, thus reducing inconveniences and time-consuming procedures,” he said.

Steven Kalisa, the head of electronic banking at Ecobank Rwanda, said e-facilities reduce operational costs.

"For instance, if a customer withdraws Rwf3,000 at his bank branch, the transaction will cost the institution around Rwf100 and, yet a similar transaction can be done free of charge digitally…this is what Rwandans need,” he said.

Kalisa added that if one transfers money online to another bank account, "the cost is nil for the bank”. He noted that it is by cutting such costs that the sector can be able to operate profitably.

Why invest in infrastructure and financial literacy

However, embracing ICTs will require more than launching products. The sector and stakeholders must develop a strong enabling ecosystem and infrastructure as well as carry out awareness drive to increase financial literacy among Rwandans.

This will help deepen the use of digital financial facilities and increase financial inclusion among the masses, especially the unbanked rural population.

The experts say growth in the use of electronic cards and mobile money services is helping the country achieve its cashless economy targets.

Alice Kalonzo Zulu, the Ecobank Rwanda managing director, said it is critical for players to invest in enabling infrastructure and financial education to boost the banking industry’s digitisation process and uptake levels.

"This will also help deepen financial inclusion by helping tap the unbanked population across the country, especially the rural masses.

"Government and the central bank are investing heavily in infrastructure to support efforts geared at increasing financial inclusion. As sector players, we are also working with other stakeholders to supplement these efforts,” she told Business Times.

Zulu is confident that digitising the banking sector will help minimise the risks that often come with traditional forms of payment systems.

Government has been encouraging the banks and ordinary Rwandans to embrace electronic platforms, not only for their efficiency and safety during business transactions, but also they are proven enablers of economic growth because ICTs help widen the tax base and create employment.

According to the 2016 FinScope Rwanda survey, the country’s financial inclusion rate was 89 per cent, up from 72 per cent in 2012. With more and more banks going digital and embracing agency banking, the remaining 11 per cent could also be formally banked in coming years.

Challenges

However, despite the journey thus far, Rwanda remains a cash dominant economy mainly due to a history of cash-based culture and affordability of some of the e-financial devices. For example the number of inactive, dormant accounts is still high active subscribers are estimated at 35 per cent over the past few months limiting the opportunity of accessing other financial services (loans) because of lack of credit history.

According to BNR, the number of touch points in terms of points of sale (POS), agents, and merchants are still limited with most payment terminals, representing almost 84 per cent, concentrated in Kigali.

High cost of payment services both for cards and mobile financial services and low level of acceptance of e-payment devices by merchants coupled with limited interoperability between providers, specifically for mobile financial services systems still restrains the operational and economic efficiency of the national payment system.

However, creating public awareness is crucial to avoid present challenges and also ensure the public embraces these innovations.

The figures

There are more than 685,385 cardholders as per June 2016 figures from National Bank of Rwanda. The data indicates that there has been a surge in use of cards as points of sale (POS) as transactions rose by 84 per cent from 146,038 to 269,241 in volume and were up 39 per cent in value terms to Rwf16 billion from Rwf12 billion.

Digital financial services are tipped to drive growth of emerging economies by almost $3.7 trillion by 2025, or 6 per cent above baseline projected GDP.

An increase of two-thirds would come from raised productivity of financial and non-financial businesses and government as a result of digital payments, according to research.

According to Finscope 2016, formal inclusion was at 68 per cent of which mobile money contributed 23 per cent. The number of mobile money subscribers increased from 231,000 in 2010 to about 8.4 million in 2016.

While the saving product through mobile money is at the nascent stage according to Finscope 2016, 44 per cent of subscribers save their money on mobile phone current account because telecoms do not charge maintenance fees on mobile money accounts as opposed to bank account.