Informing a cashless economy strategy for Rwanda

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Using cash as a means of payments costs national economies 1.5% of GDP. Yet, 85% of global consumer payments continue to be made in cash, according to a 2015 MasterCard Foundation Advisors Report. The underlying factors for the dominance of cash-based transactions vary from country to country and originate from both supply-side and demand-side considerations. The objective of this project is to take a deep dive into the pre-requisite conditions for the successful transition from cash-intensive to cash-light payment systems and their implications for a country like Rwanda.

The Government of Rwanda (GoR) is in the process of drafting a National Cashless Economy Strategy which is expected to be completed by the end of 2017. As the custodian of national payment systems, the National Bank of Rwanda (BNR) will be the principal beneficiary of this study. As the regulator of financial institutions, BNR is one of the major stakeholders in the transition from cash-intensive to cash-light payment systems. Regulatory successes from other countries could be of particular importance in BNR’s attempt to create an enabling environment for the successful implementation of the planned strategy. Besides BNR, there is considerable interest in the study from various government agencies, particularly Rwanda Revenue Authority (RRA). This analytical work is directly answering a request made by the Commissioner General of RRA to the IGC Rwanda team, seeking an appropriate approach to establish and implement a successful cashless economy strategy. The strategy is anticipated to facilitate a smooth transition from cash-intensive to cashless-light payment systems in the country. This is generally part of the government’s vision of achieving an ICT-driven economy by the year 2020 as stipulated in the third Rwanda National ICT Strategy and Action Plan (NICI III – 2015). The study is directly aligned with the IGC goal of supporting sustainable growth in developing countries through policy recommendations based on frontier research. Particularly, the recommendations therein will help in improving payments efficiency while avoiding policy mistakes in the digital transformation process.

The study will adopt two approaches. First, desk review of policy and academic literature to profile the necessary conditions Rwanda needs to take into consideration to fast-track the cashless journey. These range from infrastructure/technology, product innovations, customer awareness, regulatory framework, among others. Success (and failure) stories will be profiled – Singapore, India, Kenya, etc – and recommendations tailored to the Rwanda context will be outlined. The second approach will entail analysis of relevant data – Global Findex (2011 and 2014) and/or FINSCOPE (2008, 2012, 2013 and 2016) to map the general situation and trends of financial inclusion. Stakeholder consultations will be conducted where necessary, particularly about the existing national payments systems housed by the BNR and how these could be reinvigorated.