EDITORIAL: Changes in banks' boardrooms good news in promoting financial inclusion

Saturday February 11 2023
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Customers inside Bank of Kigali’s banking hall. PHOTO | FILE


As the local banking sector gets new senior management, there is hope that they will
focus on improving financial inclusion by removing barriers that continue to undermine the access to financial services.

According to the 2020 FinScope Survey Report, a yardstick that measures financial inclusion in the country, which included progress made towards narrowing gaps.

According to report, 93 per cent of Rwandans are financially included in terms of accessing and using both formal and informal financial products.

It also showed that about 77 percent of the Rwandan population access and use formal financial products, including those that are provided by the banking sector and and microfinance institutions such as insurance firms, mobile loan lenders and Saccos.

Despite the rosy figures, access to formal banking was limited to only 36 per cent of Rwandans which means about 75 per cent of adults in Rwanda use other formal (non-bank) financial products.

This is in spite of the number of commercial banks in the country increased over the last decade. The informal sector continues to play a significant role in financial inclusion and increasing product portfolio choices with about 78 percent of adults in


Rwanda using informal financial services mainly through saving groups.

That many Rwandans remain outside the formal banking system exposes the existing gaps in the financial sector.

For one thing, the banking sector is worsening income inequalities by focusing on working with those in the formal sector. For instance, the majority of the products on the market are designed for salaried workers.

Though even salaried workers still have to beg banks to offer them credit. Banks rarely reach out to clients due to limited competition, particularly in the retail segment.

The cost of accessing banking services is also still a major barrier as well as the cost of finance.

There is room to improve the existing products by banks to ensure that it is relevant for the different segments of society and affordable.

Not every Rwandan needs a salary advance, a car loan or a mortgage. Sometimes, it could be a soft loan to buy a smartphone or five bags of baking four for chapatis business.

Our banks should treat this client with the same dignity offered to corporate clients. And as more banks deploy advanced technology, it is important to use data analytics to build a tighter connection with each customer based on their customer habits.

Customer-centric product design that overcomes behavioral barriers and increases utility should also be promoted to promote financial inclusion in the country to contribute to the growth of the financial sector.