Globally, economies that outperform others to competitively attract tourists and Foreign Direct Investments (FDIs) prioritize building automated state-of-the-art payment systems to ensure an efficient financial sector to simplify trade. In Africa, it is now only South Africa and Mauritius that beat Rwanda in terms of creating a conducive environment for investors to do business. In a number of previous articles of Hope Magazine we have extensively filed success stories specific about reforms that are progressively turning Rwanda into a doing-business-safe-heaven. In the last January issue, it was the Electronic Filing System (EFS) that has enhanced enforcement of business and other forms of contracts. In this issue, the Governor of the National Bank of Rwanda (BNR), Amb. Claver Gatete talks to our Editor Mr. Mansur Kakimba in details about Rwanda Integrated Payment Process System (RIPPS) that is being elaborated under the National Payment System Framework and Strategy that was formulated back in 2008.  

Hope: Give an overview of the Rwanda Integrated Payments Processing System (RIPPS) and why it is so important to Rwanda. 

Amb. Gatete: First of all, we need to orient ourselves with the fact: there is no way our economy can grow to the level we want  if we don't work on the payment system. The nature of the payment system determines how fast the economy grows. Thus, the importance of payment system cannot be underestimated. Launching the Rwanda National Payment System Strategy back in 2008, we wanted to look at how we can have a payment system countrywide managed by the Central Bank, working with all financial institutions; commercial banks, Micro Finance Institutions, and Savings and Credit Cooperatives (SACCOs). The RIPPS project was then introduced with the help of the World Bank, using the international company called CMA Small Systems which has extensively succeeded elsewhere in developed countries. RIPPS has two components, namely; Automated Transfer System—which looks at how money moves quickly from one account to another in real time which is called Real Time Gross Settlement (RTGS), and the second component is called the Automated Clearing House (ACH)—looking at how the central bank could improve handling of bulk transfers between accounts in batches. The actual implementation of RTGS and ACH started in February last year. Initially, there were problems because it is a new system, and required us (BNR) to do a system overhaul. In addition, the system also integrates with all other financial institutions—meaning there was need to interface with all their different types of banking systems. It also involved training of staff both at BNR and commercial banks to get used to the new system. The remaining challenge is to ensure that all financial institutions have modern banking systems like Delta, T24 and so on, that can be easily integrated with new central bank system to make interface solid. Overhauling banking systems has not spared us too, because we also trade or deal with clients' accounts like banks do. The system is up and running, with a few minor areas to fix.  
In July last year we rolled out another component of RIPPS called the Central Securities Depository (CSD), which is linked to RTGS. CSD deals only with the Rwanda Stock Exchange (RSE) in terms of clearing or settlement of transactions. It takes care of the public securities like the treasury bills and bonds offered either by the central bank or government. It also deals with private securities like corporate bonds and private shares sold through the stock exchange. I am happy to note that since the RSE started, CSD system has enabled the sale of securities. With the system, the transfer of ownership of a share (public or private security) and the actual payment is done in real time (instantly). This is what we call Delivery versus Payment. With the CSD everything is done electronically between two bank accounts (account for payment and account for security certificate)—a double entry system happens electronically in real time. The time lag in doing this is at T+2, which is one of  the highest speed you can have in equity settlement  in the world.  CSD is efficient and has had no major operational problems since its launch.   

Hope: In doing all this, how do you ensure that every financial sector player is on board, including the smaller MFIs and various forms of Saccos? 

Amb. Gatete: All financial institutions, including commercial banks, MFIs and Saccos (Umwalimu and Umurenge) are on board simply because smaller institutions like MFIs and Saccos keep their deposits with commercial banks. To this end, they are monitored and get easily integrated into the system too.  

Hope: How about the Card Payment System?

Amb. Gatete: Under RIPPS, is also the Card Payment System whose aim is to ensure a cashless economy. This is to say, transactions without necessarily exchanging physical cash. Physical cash transaction is costly because money gets old very fast and requires reprinting; besides the use of cash is not as safe. Money should be kept in the bank to make it simpler to transfer using evolving technologies like e-banking, e-payment, internet banking, mobile money transfer and so on. When money is kept in the banking system, it also becomes easier for the central bank to manage the monetary policy well. The Card Payment System is composed of two components also; Automatic Teller Machines (ATM) and Point of Sale (POS). There are now over 270 POS mostly in hotels, restaurants, supermarkets, shopping malls etc. There are also 170 installed and operational ATM machines for different banks. Whereas in 2010, total issued ATM cards to customers were at around 41,000, today they are well over 200,000. We are now encouraging banks to install machines that can as well accept deposits. 

Hope: Well, the developments are exciting but more important how are Rwandans embracing them? Finscope study done in 2008 indicated that only 21 % of Rwandans are formerly banked! 
Amb. Gatete: I am confident a lot has changed since that Finscope study. This year, BNR with the support of Access to Finance Rwanda project, is conducting a more comprehensive follow up study to extensively capture the demand side (the unbanked) and supply side (the financial sector service providers). Since 2008, there are a number of new entrants (banks), and many of the existing banks are opening many more branches across the country. Today, we have a total of over 140 branches. The competitive financial sector is rendering players to apply aggressive ways of getting many people banked. There are also many more MFIs and Cooperative Banks, like Umurenge Saccos (a total of 416) and Umwalimu Sacco branches (a total of 20 branches, expected to be 30 branches by March this year—in every district). The new study will give us a better picture of what is happening on demand and supply sides, the gaps and how to fill them. 

Hope: How has the elaboration of the National Information Communication Plans (NIC1, 2 & 3) enabled the implementation of RIPPS? 
Amb. Gatete: The Government of Rwanda has put in place an ICT infrastructure that has enabled implementation of RIPPS. For instance, the fibre optic infrastructure backbone connects all financial institutions with the fastest internet. BNR has a system called Fina offsite that links all financial and non-financial institutions; enabling us to collect information and data efficiently. This way we can easily identify risks and fix them in a timely manner. Of course this is coupled with regular onsite physical inspections— for MFIs and SACCOs, we have two inspectors per district—doing the backstops. We get information on a daily basis and we know how all financial institutions operate. Thus, the Fibre optic is an enabler in terms of both regulation and ensuring an efficient payment system in Rwanda. The telecoms are playing a significant role in enabling the payment system. So far Tigo and MTN are doing extremely a good job. Efficient regulation by Rwanda Utility Regulatory Authority (RURA) is also a major factor. In short, the elaboration and implementation of NIC 1, 2 & 3 has been instrumental to the success of RIPPS as illustrated above. 

Hope: It is a competitive world. What is Rwanda's competitive and comparative advantage in doing all this?  
Amb. Gatete: I would say, Rwanda's major competitive advantage is the visionary leadership by His Excellency Paul Kagame. He is the reason behind the fast developments like the fibre optic back borne that now covers the entire country. Two, we have developed our RIPPS out of nothing based on international standards—for instance, our CSD will be the first of its kind in the region and (perhaps) beyond to combine both public and private securities. The way our RTGS has been developed makes it easier to link it with all the EAC member states'. We are ready, we're just waiting for others…some are ready. Also, there is the Regional Payment and Settlement System that will connect all COMESA countries. Rwanda is ready for this too. A summation of all these developments in our payment system attracts strategic investors. For instance, Visa International recently launched in Rwanda. Visa will contribute significantly to the development of the payment system. The ground is leveled to even others like American Express, MasterCard, China Union Pay, Discovery, etc to come and invest in the country. Our vision is to have all international systems operate in Rwanda. It makes it easier for tourists to spend money here and stay even longer. 

Hope: In the EAC integration framework, how is the issue of payment systems progressing? 
Amb. Gatete: Through the Monetary Affairs Committee of the EAC, Central Banks of member states meet regularly, many times during the year to deliberate on evolvements in the region like banks supervision, applying payment systems, monetary policy, and financial markets and so on. We are narrowing down the gaps in our payment systems to ensure that our systems are harmonized to suit international standards. And we are making positive headways. 

Hope: What would you consider are the major challenges in elaborating RIPPS and how are you working around them?
Amb. Gatete: Realistically, the major constraint is funding of various components of the payment system (RIPPS) which are expensive. Secondly, it is insufficient local capacity. Understandably, the system is new. That is why we are investing a lot of efforts in training the users. In the same spirit we are also creating a lot of awareness of RIPPS. Last year BNR produced documentaries in Kinyarwanda that were disseminated to local leaders at district level. In addition, Town hall meetings were organized to sensitize Rwandans about RIPPS and financial sector in general. In fact, we are soon producing the Financial Guide Booklet in English and Kinyarwanda explaining the details of Rwanda's financial sector. We are working closely with RDB - IT and MINICT to run a joint awareness campaign where we sensitize on the field the practicalities of the RIPPS and other ICT developments in the country. This will go on throughout this year. 

Hope: Lastly, what does all this mean to Rwandans? Why is it so important anyway?
Amb. Gatete: The simple explanation is: Because Rwanda envisages becoming a middle income country, private sector must play a critical role. And for it (private sector) to thrive, important systems like RIPPS must work efficiently to enable efficient transfer of resources. What is even more important, everyone must be on board for us to move fast. That's why in whatever we do we're very consultative and holistic in our approach. Judging from the progress so far made, we see our dream coming true sooner than later. All instruments are in place and are working. The dream of Rwanda becoming a financial hub is surely going to be a reality, soon. If we maintain moving at this pace, becoming a middle income country as envisioned in vision 2020, will come faster than projected. The government has put in place the perfect infrastructure needed. Indeed, the ball has been set rolling.