Rwanda bets big on fintech to grow savings

Rwanda is setting its sights on a financial revolution as the Ministry of Finance unveils new tax incentives to encourage citizens to bolster their savings. The country aims to double its current savings rate of 14% of GDP, signaling a move towards increased financial security and investment opportunities. In a recent interview with Herbert Asiimwe, Head of Financial Sector Development at the Ministry of Finance and Economic Planning, CNBC Africa delved into the role of fintech in driving this economic transformation. Asiimwe emphasized the critical importance of savings in fueling private sector investment and economic growth. Despite positive strides in policy reforms and innovations, Rwanda faces a challenge in mobilizing sufficient savings to meet the demands of a robust economy. The savings to GDP ratio of 14.3% falls short of the levels required to support both public and private sector investments, highlighting the need for targeted strategies and financial products to encourage savings accumulation. To address this gap, the Ministry of Finance has introduced various initiatives in collaboration with the private sector. Tax incentives have been implemented for bond purchases, reducing the tax burden on savers and incentivizing participation in government securities. Innovations such as the Ejurizza pension scheme have gained traction, with assets under management reaching 56 billion in just three years. Additionally, three million individuals have embraced saving through interest schemes like Ejurizza, showcasing a growing appetite for financial security. The financial landscape in Rwanda is witnessing a wave of innovation, with the emergence of entities like the Rwanda National Investment Trust and financial products that cater to diverse savings needs. Banks are offering a range of savings products, while insurance companies are rolling out tailored solutions, including life insurance and pension products. This concerted effort between the public and private sectors aims to deepen financial inclusion and expand the pool of savings for investment purposes. One key area of focus is tapping into the Rwandan diaspora's potential as an alternative source of investment. Remittances from Rwandans abroad have surged, surpassing 500 billion US dollars in the past year. However, the high cost of remittance, averaging around 6%, presents a barrier to maximizing these inflows for investments back home. Asiimwe highlighted the need for technological solutions in the form of fintech products to facilitate cost-effective transfers and increase the economic impact of remittances. Drawing inspiration from countries like Zimbabwe and Ethiopia, which have successfully utilized tech-based remittance platforms to reduce costs, Rwanda aims to foster a competitive fintech environment that caters to diaspora investors. By lowering remittance expenses and promoting innovative solutions, the country aims to attract more investments from overseas Rwandans, stimulating economic growth and financial resilience. In conclusion, Rwanda's push for financial inclusion and fintech innovation underscores a strategic commitment to enhancing savings mobilization and unlocking investment opportunities. Through a harmonized approach between government policies and private sector initiatives, the country is paving the way for a more inclusive and financially empowered society.