The following article was suggested by one of our readers—if theres an idea you would like us to cover, please submit it here. Last month, MTN Rwanda revealed plans of setting up an independent company to run its financial technology (fin-tech) operations which will see its Mobile Money service move to a stand-alone company. What would this mean for the local Financial Technology Sector which is still somewhat nascent? How about the economy in general? Already, Rwanda’s fin-tech sector has a number of firms such as SAVE, a platform by Exuus Ltd which facilitates saving groups through an open and user-friendly saving groups ledger handling. Another fin-tech, Uplus Mutual Partners (U+) allows people from all walks of life to connect on the platform to contribute and save for whatever causes they may be involved in. Last year, Chipper Cash, a Jeff Bezos funded Fin-tech company that facilitates cross border payment and cash transfers debuted in Rwanda. The development by MTN Rwanda is likely to make the most of their current market position where out of about 6 million clients, 3.2 million of them are active mobile money users. Active mobile money users are clients who have used Mobile Money in the last 30 days. Of the 3.2 million users, the firm’s officials say that 2.4 million customers use MoKash for both saving and taking loans. MoKash is a service by MTN Rwanda and NCBA Bank Rwanda which allows users to save using MTN Mobile Money and to take loans on a short-term basis. Opportunities When the new fin-tech firm debuts on the local market, among the opportunities is further driving their savings and credit services. This could pose stiff competition to banks which have seemed to struggle to have relevance in the local market given then only 36 per cent of adults are formally banked (2.6 million out of about 7 million adults as of 2020). According to the 2020 Finscope survey findings, financial inclusion in the country has largely been driven by mobile money technology. Industry experts say the new MTN fin-tech could further pose significant competition to the traditional banks with regard to savings and credit offerings, considering the client data that is available to them on aspects such as users’ spending behavior, where clients spend, frequency of spending, who they send money to among others. Banks’ data on client expenditure is often not as detailed as it is common for clients to cash money from their accounts for expenditure or transfer to mobile wallets, the experts say. The new firm, another expert says, will stand a better chance for market penetration considering that it will have lower customer acquisition costs when spreading its footprint across the country. This is because while they only need to have agents across the country, banks and other financial institutions often need to have branch outlets that are expensive to set up and operate. Regulation Among the questions is what kind of license the new firm will require to operate in the local market considering its autonomous nature. In a previous interview, MTN Rwanda Chief Executive Mitwa Ng’ambi said that they had already commenced engagement with the regulator, Central Bank to establish the requirements and characteristics of the new firm. Peace Uwase, the Director-General of the Financial Stability at the Central Bank, told The New Times that currently, the mobile money business is already regulated as a separate business line - Electronic Money Issuers (EMIs) under the payment systems law. As it stands, mobile money operations have a separate governance structure overseen by a Board of Trustees that is different from the Telcom business Board of Directors. “The autonomous company will be regulated as such, unless it goes into the provision of other regulated financial services in which case the sector-specific laws and regulations would apply,” she said. That said, the Central Bank will handle the request as and when it is submitted for regulatory approval and licensing, the Director said. Speaking to The New Times, Michelle Umurungi a Senior Strategy and Policy Analyst at Rwanda Finance Limited said that as telecom firms go beyond their primary business, data, calls and messages, they are having a strong demand and uptake of their services in payments. She said that the local market has in recent years shown readiness to embrace and take up new innovation in financial services as the country pursues cashless economy ambitions. Umurungi said that the local regulatory environment has in the finance sector has been flexible to provide a sandbox environment allowing players to test new concepts. With regard to skills within this new and upcoming area, Umurungi said that new players are likely to meet skills’ gaps, like everywhere else on the continent, considering it is novelty. She however termed it ‘a work in progress’ driven by efforts of stakeholders such as Rwanda Development Board, Rwanda Finance Limited, higher learning institutions such as Carnegie Mellon University as well as players such as Andela. Other market observers fear that if the new firm was to further venture into microloans, they could face challenges of non-performing loans as they would not require collateral. A banker who spoke on condition of anonymity said that such risks could necessitate new regulation in the sector. Given the growth potential of the firm, other market analysts say that it could significantly drive up demand for MTN Rwanda’s shares. The telecom is expected to list on the Rwanda Stock Exchange by way of introduction allowing Rwandans to invest and partake in its returns.
