Home Voices Collaboration and Alternative Data Key to Driving Financial Inclusion

Collaboration and Alternative Data Key to Driving Financial Inclusion

by Sam Tayengwa
4:51 pm

Sam Tayengwa

Accelerating the rate of financial inclusion in Rwanda is critical to the country’s economic growth and ability to create a better life for its people. However, achieving this will require greater collaboration between major stakeholders, including government, financial institutions and development partners, and an increased use of so-called alternative data to assess risk and creditworthiness.

Rwanda has made significant progress in digital financial services in recent years, with over 60% mobile money penetration. This allows Rwandans to access affordable financial products through their mobile phones, driving inclusive growth and empowering small and medium-sized enterprises (SMEs).

When individuals and communities have access to financial services, they gain the means to save money securely, access credit for entrepreneurial ventures, and protect themselves against unexpected financial shocks. This, in turn, drives economic growth, fosters innovation, and creates job opportunities.

Financial inclusion can also have a transformative effect for women. When women are included in the formal financial sector, they can save, borrow, and invest in ways that enable them to break free from the cycle of poverty. Studies have shown that increasing women’s access to financial services can lead to greater gender equality, improved health and education outcomes for their families, and stronger overall economic growth.

Greater financial inclusion is also good for the financial services sector – and the African opportunity is significant. The continent has the world’s fastest-growing population, and the United Nations expects that Africa’s share of the total population will reach 40% by 2100 (against today’s 17%), implying a total figure of 4.3 billion people.

The continent has an average age of just 20 (compared to India’s 28, China’s 38 and Western Europe’s 44). Combined with its booming urban population growth, which is expected to double by 2050, this represents a sizeable generation of highly digitally-savvy individuals who will be looking to join the economic mainstream.

To drive greater financial inclusion in Rwanda, government, financial institutions and development partners must work together to create an enabling environment. This includes implementing supportive policies, strengthening regulatory frameworks, and investing in tailored financial literacy programmes.

It is also critical to embrace the use of alternative data in expanding access to financial services for underserved populations who were previously excluded due to a lack of a credit history.

Using non-traditional sources of information – including alternative data from mobile money and other non-financial data sources – can play a crucial role in understanding consumers better and expanding access to financial services for underserved populations.

Providing insights into individuals’ financial behaviour enables financial institutions to make more accurate lending decisions and allow individuals and SMEs to access the financial services they need to thrive and contribute to Rwanda’s development.

TransUnion is collaborating with stakeholders at all levels in Rwanda to develop credit scoring capabilities to include previously excluded people who were not visible to financial institutions’ traditional scoring measurements. Implementing solutions that include non-traditional data will give more Rwandans the opportunity to access the financial services and products they need to improve their lifestyles and build their businesses.

Sam Tayengwa is the acting CEO TransUnion Rwanda

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