OF SUBSTANCE AND SPIRIT
Diwa C. Guinigundo
Where else does one show how fintech can promote financial inclusion but in poor countries where access to electronic payments and settlement could spell the difference between life and death during this pandemic.
Last year, the IMF focused on Rwanda’s experience with the use of fintech in helping them fight the pandemic.
Rwanda is one of the smallest countries in Africa. It is landlocked with predominantly rolling hills. It is crawling out of poverty, a war-torn country with the bulk of the population living on less than $2 per day.
Rwanda also went through economic devastation, like the Philippines. Services were hamstrung by mobility restrictions and social distancing. Agriculture was destroyed by adverse weather, weak demand and declining export prices. Industries also failed because of slow demand and dwindling foreign direct investment in construction.
Yet, Rwanda dropped by only a bit — 0.2 percent — against 2019’s great performance of 9.4 percent and the expected 5.7 percent and 6.8 percent recoveries in 2021 and 2022, respectively.
How did Rwanda manage to cut short its romance with recession?
First, Rwanda implements a direct poverty-reduction strategy of growth. This is Rwanda’s National Decentralization Policy, a people-centered policy “that uses grassroots networks and local governments to help lessen shocks on households and alleviate poverty.” Rwandans are behind ubedehe, a cultural value that calls for mutual assistance that has also filtered up to its central government that dispenses cash transfers, public works, access to agricultural inputs — the same basic needs of people regardless of continent and nationality.
Ubedehe empowers people for social and economic mobility. With grassroots networks, vulnerable sectors and families are easily identified for assistance during this pandemic. In 2018, Rwanda implemented social support and protection programs for 6.5 percent of its 12.3 million population.
It was therefore easy for the IMF-funded Economic Recovery Fund in April 2020 to gain traction because expanded social protection allowed the government to focus on the recovery of business and jobs.
Thus, the nominal drop in national output was not surprising.
Second, the Rwandan government has leveraged on digitization of healthcare in their COVID-19 response. Innovative digital solutions were both existing and new, both of which strengthened their public health system.
What can our health authorities learn from Rwanda in its decision to go digital early in the game?
In its contact tracing activities, infections are traced through the paperless Open Data Kit application downloadable on mobile phones. Collected data are analyzed for follow up.
In doing COVID-19 surveillance, digital reporting surveillance system monitors flu-like illnesses and severe acute respiratory infections in real time. There is early warning of potential cases.
To prevent infection, Rwanda is using robots to check temperatures and monitor patients. This lessens the exposure of their frontline medical workers.
Before imposing lockdowns, Rwanda is guided by data visualization mechanism called Geographic Information System (GIS) to monitor COVID-19 at the household level to minimize lockdowns on a generalized scale, conduct localized public health interventions and monitor the more vulnerable in society.
Having better public health system and stronger pandemic management through digitization, Rwanda was able to keep their economy more open to business. Total cases as of May 18 stood at 26,215 out of 13.2 million population, or 0.2 percent against the Philippines’ 1.1 million out of our population of 110.9 million, or 1.0 percent. Their deaths totalled 345 or 0.003 percent of its population while we recorded 19,262 deaths or 0.017 percent of our population.
As we wrote last week, there could be other reasons for any narrative on flattening the pandemic. Rwanda’s amazing use of digitization must be one of them.
Appropriate regulations supported Rwanda’s financial inclusion advocacy via a decisive digital shift. Transfer fees were waived for a few months. Rwanda’s Minister of State in Charge of the National Treasury in an interview with IMF’s Country Focus on April 6 last year, claimed that these measures effectively limited cash usage and the risk of COVID-19 infection and encouraged greater peer-to-peer transfers about seven times at the peak of last year’s surge in May.
There is a catch, though.
Fintech is not only about technology. It is also about access to these technological breakthroughs. Due to widespread consolidation in fintech and retreat by smaller companies, the industry is now more concentrated and access by small customers reduced.
The IMF staff in 2020 wrote ”The Promise of Fintech: Financial Inclusion in the Post COVID-19 Era” where they used data and industry interviews to show that “financial inclusion itself could be at risk, driven by unequal access to digital infrastructure and potential biases amplified by new data sources and data analytics.”
Translation: when ordinary people could not afford mobile phones, computers or the internet, financial technology hardly means anything. We might be seeing a new form of exclusion that is abetted by the digital shift around COVID-19. The digital dividend could not filter down to the grassroots. Fiscal support will fail to reach the poor.
This means that the fiscal package should encourage investment in digital infrastructure to promote more meaningful digital and financial literacy and ensure greater digital inclusion.
The Philippines is not Rwanda. But Rwanda succeeded where the Philippines appears to have just started to warm up.
Ubedehe!