The Financial Technology sector is among the most attractive to invest in on the continent going by recent data. In 2021, out of about $5B private equity investment in African firms, the sector raked in over $2B and has been growing steadily over the last decade. What can Rwanda do to make the most of such opportunities? Fin-techs have been seen to have impact across multiple markets owing their ability to achieve what traditional banking has often been unable to. Financial technology firms have had impacts such as financial inclusion, mobilizing savings, easy payments, cheaper remittances among others. Despite the impact as well as potential in mobilizing revenue, the Rwandan Fin-tech sector is still emerging with a few notable firms including a few subsidiaries of multi-nationals. There is an estimate of between 40 and 70 fintech companies registered in the country. Regionally, sector players say that among the reasons for limited firms include complex processes of obtaining licenses to scale up their activities in different African countries calling for easier processes. This has often been the issue as governments move to regulate operations which is often interpreted as stifling innovation. Other challenges cited regionally include limited infrastructure in terms of access to data for instance national data registry or credit reference bureau. Among ways Rwanda has been moving to improve the ecosystem for Fin-tech firms includes the recent $50 million fund, backed by MyGrowthFund Venture Partners, will focus on fintech companies with proven technology, operating in Africa. The fund aims to bring together investments and fintech investment opportunities and has targets to increase African investment in African fintech specially since less than 10 percent of the private equity investment in 2021 came from the continent. The fund’s objective is to grow the capital to $120 million. With regard to regulation, Peace Uwase, the BNR Director General for Financial Stability, told The New Times that among ways they have ensured an ideal ecosystem is that they only regulate the underlying business and not the specific institution as a fin-tech firm. With that, they regulate operations such as remittances, payments among others. “Our regulatory approach is not institutional specific, it follows the underlying business that one is in,” she explained. She added that for new entrants and emerging firms where there is no existent regulation in the sector, BNR has a sandbox regulatory framework. Regulatory sandboxes typically involve temporary relaxations or adjustments of regulatory requirements to provide a safe space for startups or established companies to test new technology-based financial services. Under the concept, startups and emerging firms are often given a testing approval for a limited time, without having to undergo a full authorisation and licensing process Uwase added that they will be gazetting a revised approach to the sandbox environment in the course of the year. Soraya Hakuziyaremye, the Deputy Governor of the National Bank of Rwanda said that through the Ministry of ICT and Innovation, the Rwandan Government is in the process of developing a national Fin-tech strategy which will showcase specific attention to Fintech. She also added that the Kigali International Finance Centre had identified the Fin-tech sector as one of the sub sectors that they want to develop in the country with aspects such as incentivizing operations. “To build the ecosystem, as Rwanda we have started partnerships with countries that are already advanced in Fin-tech such as Singapore to understand aspects such as operationalization of sandbox and common challenges,” the Deputy Governor said. Rwanda has also been working with Mauritius closely with regard to the aspect. While the focus is on payment services and remittances, experts say that there are opportunities in aspects such as lending. Experts further note that Fin-techs are also creating a number of new dynamics which are influencing business models and charges of traditional banks consequently benefiting the general public.
