The value of funds transferred via Mobile Money grew by 450 per cent between January and April this year to reach Rwf 40 billion (over $ $42 million), data from Rwanda Utilities Regulation Authority shows.

This means that there was a sharp decline in the use of cash in payment of goods and services, a development that the government has been pursuing for years.

The development was among other things a result of a move by Central Bank and local telcos to temporarily remove charges on transfers between bank accounts and mobile wallets, mobile money transfers as well as removing merchant fees on payments for all contactless transactions to reduce chances of COVID-19 transmission.

The Central Bank in March announced that for a three-month period, charges in transfers would be zero-rated to reduce the chances of transmission of COVID-19. 

While the measures are temporary for a period of three months, analysis of RURA data by insight2impact, a resource centre established transfer that cost of transfers could be the barrier to digital payment adoption in the country.

The analysis shows that with zero fees more people have switched to mobile money transfers. With the number of unique subscribers, sending money virtually doubled from 600,000 in the week before lockdown to 1.2 million in the week after lockdown and 1.8M people in the final week of April.

The weekly value of money spent digitally mid-February to mid-April at merchant outlets increased 700 per cent further driving the uptake of cashless payments.

Cashless penetration is measured by aspects such as volume of transactions, usage, footprint of infrastructure such as point of sale machines, value of e-payments to Gross Domestic Product which as of October 2019 stood at 34.6 per cent.

The dominance of cash costs the government millions of dollars.    The cost of producing currency in Rwanda is estimated at $1.5 million annually while Rwandan banks spend between Rwf18 billion and Rwf20 billion annually handling cash. 

While these are only initial findings, the authors of the analysis noted that among the lessons to borrow from the development include the impact of slashing or eliminating fees on money transfers to improve digital payment chances in the competition with cash.

"Although the sustainability of this approach remains to be seen given the sacrifice in fee revenue required from mobile money operators, it provides an on-ramp for the use of digital financial services by those who would otherwise have used cash. The current data shows cash-outs from mobile wallets have also decreased sharply since the lockdown started, and are now less than half of their January values – meaning more subscribers are using digital value,” the analysis read in part.

The preliminary findings experts say serve as evidence to adjust policies basing on how different segments of the population are responding, and who is being excluded. "The public sector will need to increase its investment in data science to ensure that the digital revolution is evidence-based and leveraged for the public good,” the findings read in part.

In October last year, it emerged that in a majority of Kigali's business outlets, a client paying for a product or service via Mobile Money was often required to add at least Rwf300 considered as withdrawal charges.

This rendered cashless payments more expensive than paying cash over the counter and has led to reluctance by entrepreneurs to embrace the cashless payment systems.

This partly explained why despite the growth of mobile money penetration and transactions over the years, much of the money is cashed out or used for airtime purchases. 

For instance, at least six million mobile transactions valued at Rwf2,058 billion were carried out in the first half of 2019, according to BNR. However,  only 4 per cent of the sum was used to pay merchants for either goods or services.

This comes at a time when it has also emerged that Rwanda’s financial inclusion has grown to 93 per cent, according to preliminary findings of a recent Finscope study soon to be launched.

Financial inclusion means that individuals have access to useful and affordable financial products and services that meet their needs ranging from transactions, payments, savings, credit and insurance, among others.

93 per cent of Rwandans have been financially included since 2020 against a target of 95 per cent by 2024.