When ICT took financial services to people’s homes

Information Communication Technology (ICT) has in recent times been dubbed as the facilitator for the growth and development of most sectors, banking inclusive. World Bank statistics indicate that high speed internet connection has increased economic growth by 1.3 per cent. This justifies the move by financial institutions to embrace ICT in order to enhance service delivery and reduce the cost of doing business. The Rwandan financial sector has embraced ICT in several ways, from mobile money to cashless systems and electronic banking, all geared towards achieving the second Economic Development and Poverty Reduction Strategy (EDPRS II) growth targets. To ensure safety and efficiency of the different platforms, the central bank oversees operations of the payment systems. The supervisory role of the National Bank of Rwanda helps maintain systemic stability, reduce risks as well as maintain public confidence in payment systems. Among e-commerce platforms, mobile money transfer service is at the peak as the three local mobile phone service providers had by the end of last year hit a penetration rate of 63.5 per cent subscribers out of the close to six million mobile phone owners in Rwanda. The service which became popular in 2009 has been on an upward trend in terms of subscribers and amounts transacted. Earlier this year, while speaking at the launch of a partnership between a bank (I&M Bank) and Airtel, central bank governor John Rwangombwa, noted that over Rwf330b (about $492.3m) was pushed through mobile money platforms last year, a 105 per cent increase from Rwf161b (about $240.2m) recorded in 2012. This was from the 57 million transactions central bank had recorded during the year, a 159 per cent increase compared to the 22 million transactions recorded in 2012. “The Rwf330b that was channelled through mobile financial services was mainly for upcountry people. This is a good development because it also eases the cost of doing business and reduces households’ operational costs as one saves money they would have spent on transport to physically deliver the money,” the governor noted while speaking at the event. From the mobile money platform, there have been several innovations, with the operators, utilities and banks trying to enhance customer service. Mobile phone users can now pay utility bills such as power and water bills conveniently, which International Growth Centre – a joint venture between London School of Economics and Oxford University – terms as is one of the main theoretical benefits of mobile money services and drives competition among providers. This has helped reduce poverty levels by facilitating the money transfers at low costs, storage and deposits. Phillip Onzoma, the head of airtel money and corporate business, notes that mobile money services are now viewed as a tool for doing business. “Since its inception over 16 months ago, airtel money has broken barriers and is now more than just a transfer money service but a tool of doing business. This not only extends banking services to the unbanked population, but promotes a cashless economy and reduces the cost of doing business. For instance, paying bills on the airtel money platform is free. Customers are only pay Rwf30 when making transfers,” Onzoma said. Banks too have partnered with telecoms to harness the ability of mobile money in several ways, with experts projecting that in the near future the partnerships could see mobile money deposits qualify to secure a loan as it has in the case of Safaricom’s M-pesa, a mobile money service in Kenya. Safaricom partnered with a Kenya bank to give clients loans using their M-pesa accounts. Embracing ICT has also eased the process and made it cheaper for Rwandans in the Diaspora to contribute towards EDPRS II goals. One of the prevalent challenges that have been faced by the Rwandan Diaspora community and other such communities is the high cost of remitting money back at home. Going by a United Nations Conference on Trade and Development for the Least Developed Countries report, the average cost of formal remittance of money is 12 per cent in LDCs, one third higher than the global average, but for the East African region, it is approaching 25 per cent as at 2012. But embracing ICT has reduced costs; one of those ways is by services that enable cheaper remittances either by partnering with mobile money providers, or services like istayconnected.net which enables people in the Diaspora pay utility bills for their family and friends in the country. Embracing ICT has enhanced transfer of money across the region with some mobile money providers like Tigo launching cross-border mobile money transfer, where local businessmen can send and receive money to Tanzania free of charge. In a bid to further widen the tax base and reach those people who currently slip through the tax net, the Rwanda Revenue Authority (RRA) introduced the M-declaration of taxes by small taxpayers at the start of the second quarter of the 2013/14 financial year. Small enterprises can now use their mobile phones to declare tax returns and pay their dues via any of the mobile money platforms, including MTN Mobile Money, Tigo Cash or airtel money. This increases the revenues collected in form of taxes for national development. On realisation that most businesses were not paying full taxes and to reduce the time and costs spent on auditors having to spend many hours investigating and going over massive documents causing disruption in operations of honest taxpayers and those who evade tax on purpose, RRA employed electronic billing machines to combat tax evasion and corruption, and improve tax management. All these initiatives have gone a long in facilitating trade and easing the operational costs for traders.