How banks can stimulate formal financial inclusion

Players in the financial sector have their work for the coming days cut out as they seek to scale up the levels of formal financial inclusion. Even though levels of financial inclusion in the country have gone up, banks continue to have a small role in driving up inclusion. Experts say that banks ought to tap into the opportunity to formalise financial services in the country. This, they say, will improve the number and quality of services available to Rwandans, further boosting the economy. According to the recently released Finscope survey on financial inclusion, 89 per cent of adult population is financially included with non-bank institutions being the largest drivers of inclusion. Banks facilitated 26 per cent of the inclusion, up from 23 per cent in 2013. This means that even though a large section of citizens can access some basic financial services such as remittances, banks’ low penetration limits the accessibility of services such as long term borrowing and services. The increase in inclusion to 89 per cent was seen to be driven by mobile money platforms, Saccos, insurance and MFIs. Speaking to The New Times, this week, Ivan Murenzi, a financial inclusion specialist at Access to Finance Rwanda, said, going forward, formal players such as banks ought to employ innovation and effective strategy to tap into virgin markets. He said this will be informed by research to understand the characteristics of the untapped market for them to develop products that suit the untapped market. According to the survey, rural areas continue to be the most underserved by banks and other formal players. Among ways that banks can make the most of the opportunity, Murenzi said, is by working in close partnership and collaboration with telecommunication companies to reach far flung potential clients. Role of banks in scale-up Commenting on the role of banks going forward to scale up financial inclusion, Morris Toroitich, the head of Rwanda Bankers Association, said the recent findings spelled out opportunities for the bankers as they seek to spread their markets. Explaining the reasons for low coverage by banks in rural areas, he said the cost of providing banking services was still relatively expensive given the costs incurred to open branches. However, Toroitich noted that banks were now embracing technology through avenues such as mobile banking, agency banking and fostering close partnership with mobile money platforms. “Technology is going to have a huge role in scaling up financial inclusion because it reduces the cost incurred in reaching potential clients,” Toroitich said. Daniel Barrientos, the chief executive of RSwitch, said interoperability between financial service providers will also play a huge role in scaling up formal inclusion. He said inter-operability between players would significantly reduce the cost of rolling out financial services across the country and at the same time lead to a cash-lite economy. Innovations around technology, he added, would also help the financial players reach out to potential clients as there would be less physical infrastructure investment required. Rwanda now ranks second in sub-Saharan Africa after Mauritius in financial inclusion. editorial@newtimes.co.rw

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How banks can stimulate formal financial inclusion