Can Rwanda be Africa’s fintech Singapore?

The small but dynamic landlocked country of Rwanda is rapidly becoming the go-to model for other African states on how to not only create but own fintech applications in a variety of ways. Report by Faustine Ngila.

Rwanda. A country rebirthed, a nation on the move. A paragon for many African countries grappling with snags in terms of contributing to the global digital economy. Rwanda is a classic example of how African states should sit confidently in the driving seat to determine their own digital destinies, without waiting for intervention from foreign countries.

Determined to achieve a firm grip on the rapid changes being witnessed in the Fourth Industrial Revolution, the country has laid down foundations for a thriving fintech sector, drawing admiration from global financiers.

The World Bank’s 2019 Doing Business Report shows Rwanda was the second highest-ranking African country at number 29, after Mauritius which ranked 20th globally.

The ‘Rwanda Vision 2050’ roadmap is anchored on digital transformation, ultimately aiming to lift most of its 12.9m citizens out of poverty through financial inclusion and access to credit.

But even more notable in the country’s endeavour to create a better future for its population is the establishment of the Kigali International Financial Centre (KIFC), which is gradually positioning Rwanda as a vital business and financial hub in Africa. 

“Fintech is a priority for Rwanda,” says Ntoudi Mouyelo, Chief Investment Officer at Rwanda Finance Limited, the government agency that manages KIFC.

Innovation communities such as the Rwanda Fintech Association (RFA) are helping to build a community of like-minded talent to help bolster the sector.

RFA says one of its core missions is to accelerate the development of fintech companies operating in or entering the Rwandan market, and foster the creation of innovations around fintech, specifically crowdfunding and distributed ledger technologies.  

The government, through the National Bank of Rwanda (BNR), the country’s central bank, has also implemented a sandbox regulatory framework for fintechs, removing regulation hurdles that stood in the way of fintech acceleration, and creating pioneering ecosystem catalysts that allow the testing of groundbreaking products.

The recent implementation by BNR of an electronic data warehouse is expected to further expand financial institutions’ demand for the process automation solutions offered by fintechs.

The Rwanda Payment System Strategy 2018–2024, on its part contains several strategic objectives, including fostering an enabling environment for innovation in the payment system through collaboration between the public and private sectors.

And seated on 60 hectares of land is Kigali Innovation City, valued at $2bn, aiming to create 50,000 jobs annually while building a critical mass of talent in fintech and innovation research.  

On another front, the government is aggressively driving start-up growth with the passage of the Start-Up Act, which lays out the government’s policies for supporting fintech innovation.

“It will create a more predictable business environment for stakeholders,” notes Alex Ntare, chief executive of the Rwanda ICT Chamber.

Start-ups have tripled

Such foundations have seen the number of fintech start-ups triple in a five-year time-frame, rising from 17 in 2014 to 44 in 2019, according to the United Nations Capital Development Fund (UNCDF) report of 2019.

Of the 44 fintechs identified, 24 are headquartered in Rwanda while the remaining 20 are based in different parts of the world including Kenya, the Netherlands, Singapore, South Africa, the United Kingdom and the United States.

Top fintech start-ups in Rwanda include ADFinance, a business intelligence firm which specialises in customer and loans management, savings and accounting core module services, serving over 300 Savings and Credit Co-operative Societies (SACCOs) on the continent.

AC Group leverages on data-driven decisions in its cashless Tap and Go payments app, which has transformed Kigali so it can boast of a clean and accountable public transport system.

DPO Group, a $288m firm, has developed the technology to enable businesses and individuals in Rwanda and abroad to make payments online and offline with all currencies and payment methods, including cards, mobile money and e-wallets.

For savings, citizens log on to Exuus, a digital platform that financially empowers unbanked citizens through an open credit infrastructure. Members of savings groups signed up to the service can make cashless transactions, debiting and crediting the group’s digital wallet from their individual wallets seamlessly.

It also allows village agents to go paperless, using the SAVE Collector platform to create savings groups, set them up, and add members on the go.

“There is an appreciation of digital financial services across the market and the region,” says Steve Shema, founder and chief executive of Exuus Rwanda.

MobiCash, a financial transaction platform, is another growing enterprise. It handles agent banking, money-remittance, merchant payments, social grants, salary bulk payments, e-commerce, micro-insurance, e-tickets, airtime credits and even tax collection.

Other fintech firms in the country include Pivot Access, Secure Payments Solutions, Azuri, ITS, Mobisol, Orion Systems, Inclusivity Solutions, TorQue, Pascal Technology, MVend, Khenz, WakaWaka, Jumo, Kountable, Insure Me, Pula and Pesa Choice, among others.

Talent grooming

Talent grooming is not a challenge in Rwanda, with world-class training centres and academic institutions producing graduates specialising in computer science and information technology (IT) to respond to the Fourth Industrial Revolution’s growing needs.

The country has forged partnerships with international players such as Insight2Impact and the Japan International Cooperation Agency, thereby nurturing fintech talent and start-ups’ staffing needs, with the UNCDF stating that “of the 24 fintechs headquartered in Rwanda, 22 were founded and are run by Rwandans”, compared to Kenya where most start-ups are headed by foreigners.

There are six active Rwanda-based investment actors, including BeneFactors, Business Development Fund, Business Partners International, GroFin, Ignite and Kountable, which provide seed and early-stage funding in all business sectors.

And twice a month, fintech start-ups hold what they call a Fintech Friday event in Kigali, a forum for networking, peer learning and information sharing.

Consequently, researchers have nicknamed the country ‘the Singapore of Africa’, with its tech-driven economy becoming an investment-attraction centre from both within and outside the nation.

The use of digital retail payments grew from 3% of the Gross Domestic Product in 2011 to nearly 27% in 2017 according to the study, with the country aiming to reach 80% by 2024, according to the UNCDF.

Mobile money constitutes the largest proportion of digital payment transactions, snowballing eight times, “from just over 1.4 million subscribers in 2012 to 11.1 million subscribers in 2018.”

The UNCDF report further reveals that mobile money transactions grew from 22m to nearly 300m and their value from $178m to nearly $2bn in the same period. According to BNR, Rwanda recorded 378.8m transactions as at the end of 2019, while the country’s mobile penetration stood at 78.8% at the end of 2018.

The government’s push towards a cashless economy, coupled with the effort to ensure that all the adult population is financially included, is regarded as the key stimulation for the rising demand for fintech solutions.

But fintechs involved in remittances are the most prevalent start-ups in the market, operating against the backdrop of government cashless initiatives; while those involved with lending are the second most prevalent, addressing the gap created by the collateral-based, bank-led lending model that currently focuses on corporate sectors.