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Nshuti Lucy Mbabazi on Cashless Economies as a Tool for Financial Inclusion

Nshuti Lucy Mbabazi is the Lead for Africa Advocacy & Partnerships at the United Nations Better than Cash Alliance, tasked with ensuring that digital payments reach and work for every African. Nshuti holds several advisory roles with a number of organizations such as  Girl Effect, Girls in ICT Rwanda, Leo Africa Institute, BBOXX Rwanda and RICTA Rwanda. Nshuti previously worked with Rwanda Development Board, Visa Inc. and Ecobank Group. 

On this episode, Nshuti breaks down the misconceptions around cashless economies and explains how cashless economies can facilitate financial inclusion. Nshuti also speaks about the policies that African stakeholders in government and the private sector can adopt to ensure innovation and inclusion in the digital payments sector.

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**The transcript below has been generated through software, and may contain errors. Viewpoints with Brenda is designed to be heard. We strongly recommend that you listen to the episode for context and speech emphasis before quoting the text below in print.

BN: On the podcast today, I host Nshuti Mbabazi, the lead for Africa Advocacy and Partnerships at the UN Better Than Cash Alliance, working with regional and continental organisations. Before joining UNCDF Nshuti served as strategy and policy advisor to Rwanda Development Board IT Department. She also served as a country manager for Rwanda Burundi and Malawi for Visa and as the Ecobank Group manager acquiring leading merchant payment solutions for 33 countries and was based in Togo. Nshuti served as a founding president of girls in ICT Rwanda, Board Chair of Leo Africa Institute, board member BBOX Rwanda, Chair of RICTA Rwanda and advisory member to Girl Effect. So Lucy, welcome to the podcast.

NLM (01:14): Thank you so much. It’s good to join you we’ve been following Viewpoints so it’s an honour to finally be here to hear your viewpoints and share mine. Thank you. 

BN: No, we’re going to be hearing your viewpoints. Thank you so much for doing this. So for as long as I’ve known you, you’ve been one of the biggest advocates for a cashless economy. And as our world grows increasingly digitised, some people are saying that, you know, cash is becoming obsolete. But what does a cashless economy entail?

NLM (01:52): Quite simply, at least from the Africa perspective, for me cashless is that we are using cashless. I have nothing against cash; I simply want to have every African have equal access to a digital financial tool that allows them to access other financial services that they could use to grow. So the continent’s GDP is about $3 trillion. But about $2 trillion of that is consumer expenditure, the money that we spend every day as we buy everything that we need. Over 90% of that, at least before COVID, was conducted in cash. That but that means that over 90% of our monies are sitting outside of the banking system. As you know, anybody that wants to do anything, and they need money, they go to a bank, for the most part. The world moves on credit. Development happens through development banks. So if then our economy is running in cash, how then can we quickly develop? And that’s the lightbulb moment I had on why it’s important that we really drive the economy towards more digital. And that means that everyone everywhere on this continent, having the choice to choose how they pay is fundamental. Today, we are condemned to only cash. And that excludes us from so many other financial services that the rest of the world enjoys simply because they are banked. 

Rwanda in 2014 or 2015 (I followed the monetary policy statement and I pulled it I followed the national budget as I typically do for the region) had a supplemental budget of loans and grants to the national budget of $318 million or thereabout. But less than 200,000 Rwandans had withdrawn $406 million from the ATM. I was asking myself what would happen if this foreign aid and at least a portion of this $406 million was retained within the banking system to fund an individual’s development or business development and even for government to borrow. And it was then that I thought – you know what, many of us don’t know, digital payments are new to most of the continent. The more you know, the better you do. 

And so I thought, let me commit some time to understand this issue, and then see what is required to get the continent to where monies are sitting in a banking system that can therefore fund our development. And I have remained committed to this to this mission, because I truly believe that our financial freedom depends on it. The more people reach financial freedom by investment, and they invest with monies from a bank, and therefore I want to whether it is a Mama Mboga in the market, who sells me vegetables, or it is me with my salary, which is paid with my salary or wages for those who employ themselves or employed in the popular sector, which many like to call the informal sector, that we each can use the monies that we have to benefit ourselves and to grow. And that really can only happen when money is sitting in the banking system. Although now with technology, we’re having all these NFT’s and these exciting innovations that are still pertaining to the freedom for someone to choose how they get paid, to simplify how people pay and are paid, and to especially help them have access to financial services to monies that can help them develop.  

So for me, that’s what cashless means. It means financial freedom for the continent. And that is rooted in what we’ve seen in the developed world and that’s what we are seeing in some of the countries here on the continent that are doing that, that are now mobilising more local resources to fund their development. And even when they have to supplement that, my hope that in the future, it is an African bank that is funding that development. So that no foreign, you know, entity is going to come and take over our airports or take off our whatever it is, because we’ve not been able to pay the loans that we’ve borrowed in another country. So that’s why cashless is my mission, and I am committed to seeing it through.

BNYeah, I mean, it is a worthy misson for sure. As we try and catch up with, you know, with everybody else, and I think anything that pandemic taught us that cashless is king, because at some point, all we could do is pay using mobile money or you know, all these sorts of things when people are quarantined. And it was impossible to actually walk somewhere to withdraw money from a bank, I think we realised.

NLM (07:26): And that was easy for you has that access. Most people don’t even have the choice of mobile money, they don’t have the choice of a card to go to an ATM. If you think about this continental free trade area that we’re building. And you think about the cross-border traders between Kabale and Gatuna or between Malaba and Busia or between DRC and Zambia. All those traders who by the way command such big trade receipts for any country and therefore revenues for any country are financially excluded, because they can’t trade with one another digitally because of the cost of transacting whether it is the FX cost or it is the transaction cost. Because it’s the small transactions under $3,000, which the financial system looks at them as small, but they’re significant for an ordinary person. Those guys are mostly women and youth and they’re the ones who are mostly excluded. The policies, don’t cater so much to the people at the border, because there’s the element of another central bank on the other side that they need to work with. So for those who don’t have access, COVID really really did them in. I was just listening to a programme then said, about 10,000 businesses between the Zambia and Zimbabwe border folded during COVID. But maybe if they had digital tools, and they could do digital logistics, all these things, maybe they could have stood a chance. If they had built some kind of financial record with the sales that they did with digital, maybe they could have gotten some emergency fund that would help them stay. Even government was struggling to give emergency funds to businesses, because there is no record of what they do. Because everything is done in cash. So we can’t miss this opportunity to ensure that everybody is included before the next pandemic. And fundamentally that at least when another crisis comes in, whether it’s a climate crisis (we’re seeing all these floods and everything) people are ready to even receive those emergency funds as quickly as possible.  You remember the Uganda situation with, you know, Minister Nabbanja’s money – it became Nabbanja’s money. But that money could have reached people so much faster, almost the same week as things were locked down, had people been already prepared with these digital tools. 

So that’s the work that we have now to do to not only prepare just do things for our current lives, but to also prepare for the next crisis to where people now less people will need greater support from government, because they would have their monies that they transact with every day, be it working for them to get a small payday loan or a small mortgage, or whatever it is that they need. So really, it really is fundamental that we get this done.

BN: And you’ve actually touched on this access point. Because you know, for a lot of people, cashless, and technology are one thing, right? They’re sort of they’re looked at in one in one light. And some people argue that actually having technology would actually reduce financial inclusion for people who might not be able to afford devices. So what do you have to say about this? And what are the workarounds?

NLM (10:48): I mean, there’s no question technology is an enabler. It just simplifies distribution. If you think about the banking system, as it were, as it has been for decades, you have people in their suits, they are going to companies that are registered to register them into to get accounts, they are going to those companies’ employees to get them to have accounts. They do things because it required that they have a branch as close as possible to people that’s very expensive. The brick-and-mortar way of banking, as it were, was just it would not make business sense to open branches everywhere. Then enter technology. You have banks like Equity Bank that said we are not going to be building any branches. Instead, we are going to work with the community to have agents that serve as the mini bank that are an extension of the bank. So by bringing the bank close to me in my village, through the bank through this agent, access is easier. People don’t are not going to go to something that they cannot easily access, especially if it relates to your money. If you have your money and you take it to the bank, and then you have to travel miles to access it, would you put it in the bank? Absolutely not. So, access is the starting point for how people should do this. We call it acceptance in this technical lingo. First you build the acceptance, the acceptance points, that means where people can take their digital accounts, and they will be accepted.  So right now cash is king. Can we get to a point where digital acceptance is king and the ordinary African has a choice of what they do. But I’m sure that with the value-added services that come when someone transacts digitally, I imagine that many people will choose to transact digitally, and I saw this myself in 2013, 2014 with a refugee camp that we were able to digitise. 

For years and years and years, these refugees from DRC, brothers and sisters speaking Kinyarwanda had been receiving food rations from donations from around the world of posho beans salt and cooking oil. All of these are things that we have and produce here in the country or any other African country? We grow maize, we grow beans, we grow we, we have what it takes, we have vegetables to make cooking oil. And we certainly have places where we can get salt. But all this is coming into an economy from another economy. So the opportunity was to then digitise and to convince the refugees that this was important. We did a financial literacy campaign generally for them to know about the importance of having an account saving and all of that. Then we had experience specifically around what they were now going to be utilising to make payments. We had to identify every single member of a household and every single head of the household that would receive that the monies that would come. So now they have a mobile phone. With that mobile phone, their account is embedded. Now people who have never had the phone, like it’s a luxury to have before now have a phone, could now not only receive money with but they can also communicate. 

Every individual was apportioned $9 a month. So $9 a month for about 14,000 or so refugees in 3500 households amounted to about $200,000 every month that came in to that local economy in that village that refugee camp was. And now these people were buying their own things, they were choosing what they want to eat, and they were buying from the local economy. But to do that, we had to find agents where they could accept their money, or where they could go and cash out. And we had to put merchants so that in case they don’t want to cash out, they can make a cashless payment. Within three months, on the first day, all of them withdrew their cash. But month three, about 60% – 70% of them were choosing to pay merchants because they realised that it’s just much easier that way, they could also get credit food on credit, because of that relationship that they have established by month six, agents were not busy, because people chose to do merchant payments. So agents chose to now become merchants, so that they can benefit from what the refugees were doing. 

So access to the technology is fundamental. Capacity to understand the value that you’re getting with this tool is fundamental, but also the places where you go that accept these things are the things that engineer change. So having seen that back then, and seeing that we didn’t have to do any, like nature took its course. And whenever people needed to get cash, they got it. But fundamentally, they made the choice that the easiest way to do this, is to pay the merchant. And because I’ve established that relationship with them, they now give me food on credit. So when I get the family portion, at the end of the month, I’m able to pay them back and then buy some more for the month.  So that ecosystem is what we need to happen on the continent. So think about when COVID If when COVID had come, if every community, every village in Uganda or across the continent, had that kind of readiness, would we be brought to our knees as we were? No. The fact that every household had been identified, every head of household had been identified and it was on record. It’s very an disbursements were going every month, during COVID, if the entire country is ideal, like for instance, in Rwanda every phone number, every phone must have an ID attached to it. And as such, when government needs to do anything, and we’re all maps to the specific villages, you’re registered in a village, the local government system is set up that we know who is where at any given time. And that’s fundamental, because when it came time to give food, benefits, or whatever was necessary, it was very easy. You work through the local government system, and it took a matter of days versus months to actually deliver help to those who needed the most. So digital is such an easy enabler. But it can only happen one when government leads to ensure that everybody has affordable access, and also works with the private sector, which by the way, is very easy, because it’s a profitable business, to ensure that people have the tools and services that they need to thrive. And in case of crisis, then it’s just much easier to read, to reach them. So digital is everything for access to where digital will become king. If there is no phone, there is no connectivity, there is no account, there is no agent, all of whom are doing their things digitally, then really, digital economies are a dream. But I am happy to see a lot of things take shape on the continent that encourage you to really dream and see that this is something that we can achieve in 10 years, if we have concerted effort from our political leaders, and especially enable where there’s innovation and private sector investment to make this happen. I have no doubt that within our lifetime, we can see a cashless Africa.

BN: Yeah, amazing story about the camp. So how should Africans stakeholders, particularly the governments, what policies should they be adopting right now, in order to encourage innovation in the sector?

NLM (19:31): The good thing is that many governments have actually they have the policies, central banks have been here for decades. But there’s also a lot that has evolved with the emergence of technology.  So for starters, government has to be committed to see that everyone in their country is well served. So they set a national vision for financial inclusion, digital and financial inclusion. Once they have that vision, then they put together a plan. That they can coordinate and ensure that they are measuring progress towards achieving those goals. Everything really starts with government leadership, and taking to heart the fact that they really want their people to thrive. So once government leads, and we’ve seen this in places like Senegal, in places like Ethiopia, that is just starting out, but it started with government saying, we need to make sure that our people are included. So they put together a national digital payment strategy, which our organisation led and supported them on this, then they put together a financial inclusion strategy to ensure that everybody, especially with a rural focus, has an account. So government leadership is fundamental to unlocking what needs to happen, then, of regulation has to be in place to now make sure that payments are reaching everyone.  

Today, you have a lot of individual proprietary solutions. We need a lot of these solutions to speak to themselves. Because imagine, Brenda, you go to Fort Portal and your favourite coffee shop, they have MTN money, they have Airtel, they have a POS, they have all these places that they’re keeping their money, because anytime you pay into that, that is money going into an account. But that is them spreading their capital, in so many places. Already, they don’t have that much. Now they have to spread it because they have all these digital payment tools. If all of that came into one device, that is what we call interoperability – that what whether you have MTN  or Airtel, or you have Equity Bank or you have whatever, you’re able to go to that coffee shop and make a payment. And then that coffee shop’s capital is all in one place. And it’s easier to have a conversation with, with the bank to lend to them. So it’s important that we have a regulation that ensures interoperable payments are in place because that means that you as a consumer, and the business all have a choice in how you want to pay and be paid. Rather than be forced to have have a MoMo, to have all these things. That means you’re spreading your money so thin. 

So government leadership to ensure that number one, we know where everyone is, we know who has the services and who doesn’t, and then make the necessary investments to make sure that they do. But because it’s such a great business opportunity, then when you create a regulation that drives consumer choice, investment will come because there is money in this business of payments. That is in volumes. Profit is in volume. That’s why you see Safaricom is as successful as it is, or MTN is as successful as it is, they’ve come from data and voice leading to mobile money being that the biggest driver of profits. So government setting the vision, putting an enabling environment that allows for investments to happen around consumer choice is the starting point. Everything else is a ripple effect or is it is a natural, a natural occurrence. Because when things are moving the way they should, then it’s just a matter of competing on price competing on the quality of service. And that is where we really need things to go. For now, people are still crying about the services that they get, they are crying about things being expensive, whether it is internet connectivity, or it is a bank account that they have to pay monthly fees, or it is the merchant service commissions that they have to pay – everything is still not what we call responsible with design. the UN principles for responsible digital payments that are rooted in designing for the the customer that you’re serving. So if government can start off by knowing their citizens knowing what they which they already do, they know their citizens, they know what they need. So government leadership is fundamental, to create an enabling environment for the private sector to take over. And private sector led development is exactly what we need. It is what every developed country has built on and that is where we need to go as a continent. So a digital economy makes that easier because businesses dominate economies and therefore, every one of them micro, small, medium, large, once they have everything that they need to thrive. I think that the narrative around us as a continent can change. And, you know, I look forward to seeing the impact of more political will leading to policy action, and thereafter especially to inspiring investments to make these things a reality.

BN: Yeah, I mean, I’m hoping so as well. And I think I think your dream is it’s worthwhile. And I think this is achievable. Everything you’ve mentioned about interoperability of, of you know, of a digital system, and what governments can do to actually achieve that. It’s all achievable. So thank you. Thank you so much, Lucy, for coming on to the podcast and for sharing your wealth of knowledge. I hope the people concerned are listening.

NLM (25:37): Okay, we’ll reach them wherever they are placed – I’m committed to knocking at every door. But thank you so much for the opportunity to discuss that even just trying to understand it. My goal is that every everyone can understand the value of this and really take it up. It’s not the job of government to do to empower us, it’s for us to that was by making these choices. So the more services are available to people, I have no doubt, Africans are smart, they’re innovative, they’re problem solvers. Even with all the odds stacked against us, we’re still standing. So when we stand together to actually make these things happen, I have no doubt that Africans will make the choice of what is easiest and best for them. And so I look forward to celebrating these achievements. And Makeba doesn’t have to live in a continent where we’re still talking about women exclusion and financial exclusion. I’m hoping that within the next by the time she’s 10, we are there. So thank you so much for the opportunity to share some of these viewpoints. And I look forward to more to come from Viewpoints. So keep it up. I know it’s not easy. It’s such a big time commitment. But you’re doing it and thank you for doing it so elegantly. Maybe you inspire some of us to get the fear out and do it ourselves. So thank you so much.

BN: You have so much knowledge you should get into it. Thank you. No, thank you so much. And I’m actually sure Makeba by the time she’s 10 she’ll be telling everybody about what her mom did with the cashless economy in Africa. 

NLM (27:12): God willing. We are framing cash for her so that she knows that it was history at some point before transaction with cash. Thank you so much.

BN: Thank you.

NLM (27:25): All right. Take care. 

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