COVID-19 Boosts Rwandan Cashless Economy


CLEVELAND, Ohio —  Rwanda, the landlocked East African nation of 12.5 million people, received a burst of media coverage in June 2020, when its government, working with Pascal Technologies, provided free motor meters to 20,000 motorcycle taxis in Kigali, Rwanda’s capital. Rwandan taxi drivers had been without work for months during COVID-19. In June, not only did they return to work but they also received digital payment systems. This is a government effort to fully realize a Rwandan cashless economy by 2024.

Removal of Transaction Fees During COVID-19

The Rwandan government’s pursuit of a Rwandan cashless economy initially received resistance from consumers and merchants because of the transaction fees involved in using mobile money on cashless systems. Since COVID-19 might be spread by touching paper money and coins, the government used this to promote the Rwandan cashless economy. During COVID-19, the government removed the transaction fees involved in mobile payments. With transaction fees eliminated, mobile money transactions increased by 450% from January to May 2020. The government then introduced the taxi motor meters.

The elimination of fees on cashless payments had benefits for Rwanda. The National Bank of Rwanda’s 2019/20 annual report shows that despite the economic slowdown due to COVID-19 shutdowns, the country’s financial system remained sound and prices remained stable. Bank sector profitability and liquidity rates improved for both microfinance institutions (MFI) and banks. The e-payment to GDP rate increased from 34.6% in June 2019 to 54% in June 2020. Additionally, the percentage of counterfeit banknotes dropped significantly.

Benefits of a Taxi Cashless Payment System

The taxi motor meters provide a number of benefits for motorcycle taxi drivers and their clients. In the past, drivers and customers often argued about the fare of a trip, but now, the meter automatically determines that. As Kigali entrepreneur Karanvir Singh told the Guardian, road accidents have been the largest cause of death in Rwanda. Motorcycle taxi accidents have an 80% role in that. According to Singh, because of the competition to secure customers, taxi drivers drive too fast and end up in accidents. Now customers can use the digital platform to schedule motorcycle taxi drivers. This eliminates the need for drivers to race to complete a run so traffic accidents should go down.

Rwanda Pursues Financial Inclusion

Taxi drivers using the Pascal Technology digital platform, which runs the motor meters, also benefit because when they register on the platform, they also register for a bank account. The motor meter is actually a smartphone that the taxi drivers pay for at a later stage. Meanwhile, they learn how to use smartphones and are able to utilize the devices for personal use as well.

Consumer education about digital payment platforms and how to navigate banks and other financial institutions improves financial inclusion. This means that individuals and businesses have access to financial services and products that enable them to have access to savings, credit and insurance. Digital payment platforms also make payments and other financial transactions easier. Financial access helps people create and expand businesses, protect themselves from financial risk and downturns and access health services and education. This accessibility improves their quality of life and helps them to rise out of poverty.

As part of the pursuit of a Rwandan cashless economy, the government has had a goal of improving its financial inclusion for several years. In 2014, Rwanda joined the Better Than Cash Alliance, hosted by the United Nations Capital Development Fund (UNCDF) and funded by the Bill and Melinda Gates Foundation, which helps governments transition to a cashless economy.

Benefits of a Cashless Economy During COVID-19

In addition to the digital payment system for taxi transport, COVID-19 boosted the Rwandan cashless economy in a number of other sectors. Consumers began to increase their use of online grocery stores, education technology platforms, online pharmacies and online gaming. Digital payments increased as well. Lucy Mbabazi, from the Better Than Cash Alliance, suggests that a real positive is that merchant payments will continue to be fee-free beyond the pandemic.

The World Bank Supports Digitization in Rwanda

In April 2020, the World Bank granted Rwanda a $14.25 million credit to support a Rwanda COVID-19 Emergency Response project. One focus of the project is to digitize healthcare to fight COVID-19 by supporting telemedicine to assess cases without traveling to a clinic. It also creates digital maps to track COVID-19 spread and promotes mobile apps to send health messages. The World Bank granted Rwanda the credit partly because of Rwanda’s strong track record in pursuing a Rwandan cashless economy. As a Better Than Cash Alliance member and a World Bank credit recipient, Rwanda is in a strong position to realize its goal of a Rwandan cashless economy by 2024.

Shelly Saltzman
Photo: Flickr


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