The lack of established financial infrastructure in Africa offers considerable opportunity for FinTech and Rwanda is positioned nicely for this opportunity, according to Steven Marshall, CCO of Crown Agents Bank.
As of 2018, there were around 12.2 million people living in the country. Obviously, this tiny compared to countries like China and India which have populations of around 1.3 billion and the US, which has around 329 million people living there. But Rawanda also has a rather small population compared to other countries on the African continent. According to Statista, Nigeria is the largest country in Africa, in terms of people, with 206 million individuals living there. It is followed by Ethiopia, Egypt and the Democratic Republic of the Congo, which have populations of around 114 million, 102 million and 89 million, respectively.
Despite Rwanda having a small population, it doesn’t mean it is not ripe with opportunity. In fact, the country is one of the fastest growing economies in the world, with it witnessing a 7.5% growth rate between 2008 and 2018 and an annual growth domestic product (GDP) of 5%, according to the World Bank. Furthermore, The World Bank claims Rwanda was voted the second best in Sub-Saharan Africa for ease of business. The country also has the ambition of becoming a Middle Income Country (MIC) by 2035 and hit the High-Income Country (HIC) status by 2050. It aims to achieve this through a series of seven-year National Strategies for Transformation (NST1).
Steven Marshall, CCO of UK bank Crown Agents Bank, said, “Despite its small population of 12.2 million, Rwanda has positioned itself as a profitable commercial hub and an attractive investment prospect, despite the continent being fuelled primarily by the continent’s three main tech dominators – South Africa, Kenya and Nigeria. A significant increase in funding for financial sector development work in Rwanda is anticipated, which will, in turn, boost the availability of finance for local businesses across the country. “
What makes Rwanda particularly of interest to the FinTech world, is the scale of opportunity available. Cash Matters claims that 7.1 million of the population in Rwanda are above the age of 15 and only 50% of these have bank accounts. This is a colossal market of unbanked consumers, leaving a big opening for FinTechs to help the population get engaged with their finances.
Not only does the high percentage of unbanked offer FinTechs with an appealing situation, but so does the lack of an established financial infrastructure, Marshall said. This leaves a good space for FinTech innovation and investments. Couple this with the rising number of mobile phones, leaves a promising market for growth. The country’s Ministry of ICT claims around 80% of individuals have a mobile phone, but only 14% of these are smartphones. However, there is a government initiative to increase this, due to the importance these devices play on daily lives and financial access, and has recently revealed a campaign to raise one million smartphones for poor families. Rwanda also recently saw its first smartphone manufacturing plant establish, according to a report from AA. With this work, mobile-based FinTech apps could become integral to Rwanda.
Marshall said, “Rather than being restricted by the lack of traditional infrastructure, African fintech is attracting international attention for their ability to bypass ‘essentials’ for financial processes. The rise of mobile wallets has transformed both access to payment methods for many Africans and the way the rest of the world views financial services. FinTech in the UK might be an interesting alternative to established banks; in Rwanda and more broadly across Sub-Saharan Africa, it is a vital and innovative shift towards a digital, ‘banked’ future.”
Statistics from the United Nations Capital Development Fund show there are a number of FinTech platforms are already seizing the opportunity in the market. The number of FinTech companies operating in Rwanda has grown steadily year-over-year since 2010, rising from just five to 44 in 2019. The most popular space for these companies is the payments and remittance sector, with 17 of the companies offering such services. Lending, savings, financial software and insurance make up the remaining companies, with 14, 8, 8 and 5 companies, respectively. One of the FinTech companies to be headquartered in the country is exuus, which is a digital platform that creates saving groups which are built on a collective decentralised ledger to boost community financial situations.
There have been a number of other FinTech companies, which were founded in other African countries, to make their move into Rwanda. This includes South Africa-based Inclusivity Solutions, an InsurTech platform which designs, builds and operates digital insurance. The InsurTech recently closed a second tranche of its Series A round, adding an additional $1.3m and bringing the total to $2.6m. Another FinTech to expand into Rwanda is Chipper Cash, a cross-border mobile payment solution, which closed a $6m seed round last year.
The UK-Rwanda partnership
At the start of the year, the UK hosted the Africa Investment Summit. This comprised of 21 countries from across Africa, many represented at Head of State level, as well as multilateral bodies, UK and African business leaders and influential voices. Among those to attend was the Rwanda president, Paul Kagame. During the event, it stated 2020 would be an important year for UK and Rwanda relations.
Earlier in the year, the UK Development Secretary Alok Sharma revealed an additional £6m will be deployed to Rwanda to aid financial sector development work, boosting the availability of finance for local business. This year also witnessed the first Rwandan Franc bond listed at the London Stock Exchange, which will give Rwanda access international markets to drive investment and develop Rwanda’s capital market without increasing exposure to potentially damaging exchange rate fluctuations, a report from the UK government claims.
The two countries have established a strong relationship over recent years. In 2015, the UK revealed it would invest £4.8m into Rwanda to support the business climate. This helps to deepen the transparency, predictability and certainty of the country’s investment climate. The UK also backs the Access to Finance Rwanda programme, which is helping to boost financial inclusion and access to financial services in poor areas.
Marshall said, “Rwanda is becoming increasingly central to Africa’s global presence, with its capital Kigali hosting the next Commonwealth Summit as well as the 2020 Climate Change Summit Africa this year. The UK, on the other hand, is forging a new position in the global economy as it leaves the European Union and explores new trade partnerships. As a world-leading economy, partnerships with smaller nations could be expected to be on the back burner, but the potential offered by emerging markets is increasingly hard to ignore. UK’s investment in Rwanda makes this apparent and is something long-serving players in Africa like Crown Agents Bank have observed for decades.”
“2020 is a pivotal year. The beginning of a new decade often marks a milestone in both businesses’ and countries’ growth ambitions, offering a chance to reflect on the last decade and plan for the next. The ongoing Covid-19 pandemic is clearly a significant focus for everyone and the impacts are likely to be far-reaching, but long term planning is still happening,” Marshall said.
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