Rwanda has removed import duty on digital payment devices as it seeks to reduce cash transactions and operational costs to banks.
Banks are grappling with high operational costs as a result of running many branches and working for longer hours in order to serve their clients.
“The ultimate aim is to make e-payment devices more affordable and accessible to merchants, even those in villages,” said Peace Uwase, executive director of financial services development at National Bank of Rwanda.
Depending on the type of POS terminal, bankers say a unit costs $100-$400 each, which several banks have avoided, save for Bank of Kigali and Equity Bank Rwanda.
Most POS gadgets are mostly found in supermarkets, hotels and at the airport, targeting mostly tourists and other business people.
The low use of e-payment devices puts Rwanda’s target to swift to a cashless economy and boost the ratio of digital transaction to GDP from 16 per cent to 55 per cent at a risk of failure.
I&M Bank Rwanda managing director Robin Bairstow hopes to benefit from the tax cuts to rollout the device next year.
“Cash handling costs the banking sector a significant amount of money on annual basis. Because we have to keep our branches open for longer hours,” said Mr Bairstow.
“The more we transact electronically through electronic channels, online banking, mobile banking, it reduces costs within the banking sector,” added Mr Bairstow.
Banks are also set to mobilise deposits cheaply through digital banking, which will increases liquidity and facilitates banks’ lending to the economy.
Analysts say the cost of credit could also reduce as banks will have cheaper sources of funds to lend.
“Electronic payments usage increases the velocity of money in circulation and therefore people access money easily and quickly,” a banker said.
This comes after VAT on customs imports and excise duty were earlier scrapped.
According to the central bank, the POS transactions reached 789,428 in the first six months of this year, a 21 per cent increase.
And at least the volume of transactions increased from Rwf32 billion ($36.4 million) in the first six months ending June, 2017 to Rwf39 billion ($44.4 million). Rwanda target to boost POS transactions ratio to GDP to the targeted 55 per cent, by 2020 from 16 per cent recorded in September 2016.