By 2050, Rwanda aims to position itself as a regional financial centre and one of its strategies to achieve this goal is to become a testing ground and launchpad for fintech innovation.

Fintech innovation ecosystems globally vary in complexity and regulatory frameworks. As innovation is driven by evolving consumers’ needs, universal regulations cannot cater to every product or company model. On the one hand, regulatory bodies have diverse perspectives towards innovation, which affect their approach towards fintech. While startups continue to push for further favorable policies and regulations, the regulators seek to strike a balance between the evolving landscape of digital financial innovation and the risks stemming from novel and unregulated markets.

In November 2022, UNCDF in partnership with the Central Bank of Rwanda organized a 2-day workshop that brought together regulators, fintech companies, and other stakeholders in the ecosystem. The objective of the workshop was to raise awareness on existing regulations and inform the design process of legal and regulatory advisory toolkits that will help fintech start-ups to better cope with regulations.

“It was interesting to see commitments from the different regulatory bodies. It’s quite unique to Rwanda because in a number of other markets, it is not as easy to have multiple regulators in one room saying that they are going to designate open office hours for more interaction with innovators. I think we are even ready to see new players in the ecosystem because the more you signal that you are embracing and you are ready to engage with innovation, you are opening up the market for even some of the foreign startups coming into the country.” Said Aneth Kasebele, Policy Specialist at UNCDF.

Through this workshop and similar campaigns in the future, UNCDF is working with the Central Bank to increase the number of compliant fintech companies in Rwanda providing the latest insights on regulations and licenses, guiding startups to navigate the regulatory environment and increase regulators' understanding of challenges faced by fintech providers and promoting awareness of regulatory incentives to drive innovation.

While many fintech startups are eager to enter the market, they often lack the necessary information to navigate the regulatory environment effectively. In addition, some fintech companies have reported that the regulatory frameworks can be complex and not conducive to innovation. Meanwhile, regulators expressed their concern that many fintech startups were struggling to articulate their business models and market risks. This made it difficult for them to obtain licenses, creating a barrier to their success. To address this issue, workshop participants suggested that regulators collaborate with innovation hubs and facilitators to help fintech startups better understand their business models and market risks.

Another recommendation was for regulators to work closely with incubation hubs to help startups tailor their fintech ideas and understand applicable regulatory requirements and procedures before they approach regulators. This would help smooth preparation and participation in the regulatory sandbox which was re-launched by the National Bank of Rwanda in April 2022. The sandbox provides a real-customer testing environment to promote responsible innovation and protect consumers. The sandbox is uniquely important as a space for both regulators and startups to learn from each other.

According to Chris Songa Musonera, a financial sector development and inclusion analyst in charge of fintech and innovation at the Central Bank, the workshop helped the institution to raise awareness on what they do and the regulatory services they offer.

“When we have this kind of training we collect feedback, we are able to identify gaps, as a regulatory body, we are going to update our regulations and accommodate fintech companies better. We are going to put provisions that can help them better. So, this is part of the process to grow as regulators but also for fintech companies to understand better what we do.” Mr. Musonera noted.

During the workshop, participants were also informed about licensing and regulatory frameworks by other regulatory bodies in Rwanda, including the Capital Market Authority and the Rwanda Utilities and Regulatory Authority. They learned how these frameworks complement the Central Bank's fintech regulatory frameworks, depending on the type of products and services offered by companies.

Jean-Hubert Ishimwe Nkurayija, who owns Favouriapps, a fintech company that created Kashi app which helps users in money management and to have a shared wallet, said the training helped him to learn about different regulations that are in place for fintech products and why he needs to comply with them.

"We are very eager to learn about the procedures to be licensed because as a fintech you have to come across regulations and understand potential cybersecurity risks that may affect your product. It was a great interactive and informative session, and now I know what to do and focus on so that I am ready to comply with regulations.” Nkurayija reflected.

Since 2019, UNCDF has supported Rwanda’s journey in the development of its Fintech ecosystem by conducting a Fintech Landscape Study that produced insights on the Fintech environment in Rwanda, including regulatory and policy challenges. UNCDF also facilitated the setting up of a fintech innovation hub to support Fintech startups with technical skills, seed capital, awareness of the regulatory environment and access to the market.

Watch the workshop highlights: