There is a need to subsidize the cost required for Micro, Small and Medium Enterprises (MSMEs) to be on e-marketplace, players in the ICT sector have made the case.

According to an assessment by the ministry of ICT, currently, there are 186,396 Micro, Small and Medium Enterprises (MSMEs) registered in Rwanda, but less than one per cent of them are running their business through e-commerce platforms due to some challenges crossing the e-commerce value chain.

The assessment shows that some of these challenges range from the high cost for Merchant Discount Rate (MDR), high cost of delivery, the low level of digital  and financial literacy, and many other issues.

The merchant discount rate is the rate charged to a merchant for payment processing services on debit and credit card transactions.

In a bid to increase adoption of e-commerce among the small enterprises, the government is subsidizing the cost for some MSMEs to help them get access to a wider market, and reduce the negative impact of Covid-19 on their businesses.

Consolata Nakure, the E-commerce projects lead at ICT Chamber said that there is a pilot project that has been going on for six months to stimulate e-commerce adoption.

"Subsidies have been injected in stimulating MSMEs to onboard on the selected e-commerce platforms and thus propelling online sales,” she said.

She said that the traditional way of doing business should change considering that the world is now connected and that the Covid-19 pandemic has reminded the world of the importance of digital technologies and e-commerce to sustain economic activities and trade, especially of essential goods.

"The businesses should now adopt digital options and that is why campaigns are needed to show businesses the benefits of e-commerce, e-payment,” she said.

She said that they are working with all people with digital solutions to businesses.

"There are e-commerce platforms but they are used by few vendors. We have to connect vendors and platform owners. But because some vendors do not have enough money, we tried to subsidize onboarding fees to the platforms,” she noted.

Cost related to the transaction, she said, has been identified as one of the primary barriers for MSMEs to sell through e-commerce platforms.

Nakure said that depending on each e-commerce players’ business model, there is a fee required for the SMEs to be on the platforms.

 This fee can go up to Rwf35,000  depending on the platform, and it is a one-time fee.

 The cost required to unroll MSMEs on the e-commerce platforms has been subsidized by 50 per cent.

"The project to reduce the cost required for MSMEs to go on e-commerce platforms will help them increase their revenues, and leverage the IT tools,” she said.

At least 1,000 micro and small enterprises are being supported to deal with the cost under the programme in a  six-month period in a partnership with the ministry of ICT and The UN Capital Development Fund.

Under the supporting package , there is a waiver of a certain percentage of the Merchant Discount Rate (MDR) cost ranging from 2 per cent  to 3.5 per cent of the cost of the products to all new and existing MSMEs.

 "By reducing the MDR cost, we are also reducing the burden that deters MSMEs from generating revenue in the digital era,” she noted adding there is need for strengthening the adoption of e-Commerce  by enhancing digital and marketing skills, access to finance, improved business management skills, and more investment.

"The opportunities for leveraging digital technologies are immense. They allow people to connect and trade online and businesses to access large markets and global value chains while overcoming costly intermediaries,” she added.

 "There are so many digital options for e-payment. We have been testing how small businesses we supported are using them and we will reevaluate the experience to decide the way forward and see if there are challenges we should address and probably repackage,” she added.

She said that another programme dubbed "Ihuzo”funded by Mastercard Foundation to enhance onboarding businesses to digital payment options.

"Ihuzo is a convening platform that connects businesses to digital solutions providers,” she said.

According to businesses the main challenge is lack of digital skills.

"You might be aware of the digital options, but the big problem is having the skills to use e-commerce platforms. In addition the transaction costs must be revisited because many fear the cost can increase,``said Diane Ingabire, a vendor of children’s clothes in Kigali city.

Ismael Byaruhanga is a Research Fellow at IPAR-Rwanda says that there should be a review of transaction fees to take place.

One option for stimulating economic activity could be to exempt transactions on some small transactions. Given that there are many potential options for alternative fee schedules, trials could be conducted to identify the lowest transaction fees that could be profitably sustained by service providers, he said.

In more recent years, e-commerce has helped to diversify and transform countries’ economies and improve export competitiveness as more and more people move, connect and buy online.

According to UNCTAD, global e-commerce sales in 2018 amounted to US$ 25.6 trillion, up by 8 per cent from the previous year.