The Covid-19 pandemic, and the sharp spike in energy costs… are the latest in the series of global shocks which have contributed to the disruption of global supply chains and triggered inflation on the African continent. These crises have come at a time when the Global South is already dealing with the existential threats of extreme poverty, political instability, and the climate crisis.

The rapid advancement of digital technologies and industries present a unique opportunity for African economies to mitigate these challenges and accelerate progress towards achieving universal and sustainable development. An example can be seen with the growth of the fintech industry. Fintechs offer financial inclusion for both MSMEs (micro, small and medium-sized enterprises) and private citizens in developing economies who have been previously excluded and have been driving the move from cash-based to digital financial transactions. Through the simple act of democratising finance, fintechs are supporting African countries especially the citizens to build their resilience to withstand global shocks.

The Fintech Industry                                              

Universal financial inclusion is a key driver of sustainable development, contributing to access to credit, savings and asset accumulation for the general population, government efficiency and transparency, supporting inclusion for vulnerable and disadvantaged groups in society and enabling the growth of businesses. Fintechs have emerged alongside traditional players such as banks, insurance firms and microfinances as key contributors to financial inclusion in the developing world.

One of the advantages of fintechs is their ability to bridge the financial inclusion gap. In many developing countries, including Rwanda, large segments of the population (particularly women, youth, refugees, and disabled persons) remain unbanked or underbanked, lacking access to basic financial services such as savings accounts, loans, and insurance. Fintech solutions, such as mobile banking and digital wallets, have made it possible for these individuals to access these services through their mobile phones, bypassing the need for traditional financial institutions.

To better illustrate, during COVID-19 – women savings’ groups started using a fintech solution to transition their saving schemes and lending capabilities through digital tools and enabling them to continue digitally save and lend to each other throughout the pandemic.

By Mid 2022, the value of e-payment to GDP increased from 95% to 111.9% significantly showing the acceptance of digital financial services amongst Rwandans. This is following significant awareness campaigns as well as key regulatory interventions that enabled ease of transition for new users of digital financial services especially with merchants.

This increased accessibility empowers individuals by providing them with a secure means to save money, access credit, and manage their finances. Recent decades have taught us that few factors work better as incentive for the adoption of new technologies than convenience. The ease with which digital wallets can be set up has led to a wave of digital financial services adopters among young people, rural areas and users who would otherwise not bother with the bureaucratic process of opening an account with a traditional financial institution.

Greater financial inclusion can also unlock additional benefits to the economy. In the case of farming communities, the ability of small agricultural producers to freely send and receive money can reduce their reliance on middlemen or large distribution chains when bringing their products to market. This, in turn, should have the effect of lowering food prices and maintaining the financial sustainability of small producers.

Fintechs have been front and centre when it comes to the digital revolution and driving the move from cash to cashless transactions. In many parts of the world, but particularly in Africa, the informal sector represents a significant size of our economy. The dominance of the informal sector has long challenged the ability of governments to regulate and conduct oversight on economic activities and limits the ability of governments to raise resources to support essential public services. The move from traditional to digital payments has supported the formalization of economic activities, resulting in improved fiscal transparency and reduced leakages. Less directly, formal financial inclusion and the growth of the taxpayer population foster a deeper feeling of civic duty and kindle the drive for democracy and justice in places where they are lacking.

In Rwanda, we continue to position ourselves as a “proof of concept country” and are willing to continue enabling innovators to bring forth solutions that promote financial inclusion in Africa. Through sandboxes both within the Rwanda Central Bank and the Capital Market Authority of Rwanda, innovation is provided an agile regulatory environment to test and expand.

Looking Towards the Future

The world of technology is no stranger to rapid changes, but unlike many other technologies which are yet to prove their social worth, fintech is already making an important difference to millions of people accelerating inclusivity and social change.

You need only look at the farmers of Africa, who in many places adopted fintech and mobile money solutions en masse, flipping decades of banking exclusion in mere years or the MSMEs of India who have taken up new opportunities with neo-banking after struggling to obtain funding from traditional banks.

Of course, fintech is no miracle cure for all of the world’s ailments and the viability and growth of fintech solutions particularly in the African context continue to be limited by infrastructure gaps, low digital literacy and a lack of regulatory harmonization. As the number of mobile phone and internet users rapidly grows, robust investment in digital infrastructure and literacy will continue, and we will continue working towards promoting digital financial services in collaboration with other African governments to adopt and harmonize regulations that support the rapid scale up of fintech companies as well as interoperability for fintech systems.

Rwanda will be hosting, from 20 to 22 June 2023 in Kigali, the Inclusive FinTech Forum, an initiative looking at addressing financial inclusion, not just in Africa, but across the Global South.