As part of its goal to have 100 percent of adults formally financially included and to build a robust payments system that facilitates a cashless economy by 2020, Rwanda is targeting 80 percent financial inclusion by 2017 through the aid of the Financial Sector Development Programme II.
“Rwanda has set an ambitious objective of reaching 80 percent of formal financial inclusion by 2017, and I am pleased to say that significant progress has already been made towards achieving this target,” says John Rwangombwa, Governor, National Bank of Rwanda.
According to Jean Bosco Iyacu, Technical Manager at Access to Finance Rwanda (AFR), “We have a target, by 2017 to reach 80 percent financial inclusion and by 2012 we had 72 percent, so this year we should know around April what level we are at.”
A stumbling block
Some analysts, however, say financial illiteracy could be a stumbling block to achieving this goal.
“Last year it was found that too few people understood what the budget was; bringing about concerns that if Rwanda does not have financial education, the likelihood for financial inclusion would also be slim,” reports CNBC Africa.
But one thing Rwanda, a small landlocked nation with a population of just over 11 million, has going for it is an ambitious government that sets aggressive targets and works hard to meet them.
Already, Rwanda’s government has a big campaign to address financial education and it is hoping that will provide the people with the basic concepts around finances, says Iyacu. And one of the methods the government will be implementing is the national e-payment strategy, which it believes will have different strategies to tackle the basics.
Good support
The Rwandan government enjoys good support from the World Bank and other international organizations. This is a plus.
For instance, Swedish International Development Cooperation Agency (SIDA) has extended a $2.9-million assistance to help in the realization of this national financial inclusion mandate.
“All these funders are behind Access to Finance Rwanda, to make sure that the rural poor, especially the excluded in the financial sector, get access to financial services and we have been for the last five years working with different partners to make sure that happens,” said Iyacu.
In July 2014, the World Bank Group launched a programme to mobilize technical capacity and knowledge to help Rwanda achieve its financial inclusion goals and targets. Tagged the Financial Inclusion Support Framework (FISF) for Rwanda, it is a $2.25 million trust fund executed by the Bank Group and financed by the Dutch Government.
Fully aligned with the Rwandan government’s Financial Sector Development Plan II, the programme has focused on key areas expected to have the greatest impact based on Rwanda’s financial inclusion agenda. These include Micro, Small and Medium Enterprise (MSME) Finance, Financial Consumer Protection, Financial Literacy, Payment Systems, and Financial Infrastructure.
At the launch of the programme in 2014, Bertrand Badré, Managing Director and World Bank Group Chief Financial Officer, said Rwanda was the first country in sub-Saharan Africa and one of two globally to benefit from the programme.
“It will help the country meet its ambitious financial inclusion goal through technical assistance, advisory services, and capacity building for far-reaching policy and regulatory reforms as well as critical financial infrastructure development,” said Badré.
Prior to the FISF, the World Bank Group had other support programmes for the development of Rwanda’s financial sector. By 2014, it was working with the National Bank of Rwanda to strengthen financial stability with a $2 million trust fund financed by the Financial Sector Reform and Strengthening Initiative (FIRST).
Not too far behind
In December 2015, CGAP (the Consultative Group to Assist the Poor), a global partnership of 34 leading organizations that seek to advance financial inclusion, published the result of a Financial Inclusion Insights (FII) survey it commissioned, aimed at better understanding the Rwandan financial landscape. The nationally representative survey of just over 2,000 Rwandans covered many aspects of mobile phone ownership and usage as well as financial behaviour.
The survey found that despite low rates of technical literacy and handset penetration, DFS (digital financial service) is showing healthy growth in Rwanda; that Rwandans are actively using advanced features, especially bill pay; and that Rwanda has one of the highest rates of insurance penetration globally.
A breakdown shows that 17 percent of Rwandans are active mobile money account holders. “This is the same as Ghana, and not far behind Uganda. This growth has occurred in spite of some of Rwanda’s relatively low rates of handset ownership (47 percent) and experience with sending/receiving text messages, i.e., technical literacy (37 percent),” according to CGAP.
Furthermore, 25 percent of active mobile money account holders in Rwanda use their accounts to pay bills (mostly electricity) – the highest amongst FII countries in Africa. This habit provides opportunities for digitization that can push the needle on financial inclusion and rapidly drive the growth of digital financial services, says CGAP.
In terms of insurance penetration, the survey notes that 85 percent of respondents claimed to have some basic form of insurance, with medical being the most common (83 percent). “This is the highest penetration amongst FII countries, well ahead of runner-up Ghana with 65 percent penetration. Much of this growth has been driven by a government health insurance scheme known as Mutuelles de Sante. It is available for free to the poorest Rwandans (as classified by their communities), but 71 percent of respondents in our survey noted they paid an insurance premium.”
Growth opportunity
Despite the progress already made, CGAP sees opportunities for growth in three key areas: digitization of government payments and collections; increasing handset penetration; and offering over-the-counter (OTC) services for those without phones.
“The low level of handset penetration is a significant barrier to the growth of digital financial services. Less than half of the population (47 percent) owns their own handset, and 51 percent has a SIM (an average SIM card owner has two SIM cards registered in their name). Until these numbers increase, the uptake and usage of digital financial services will be constrained,” CGAP notes.