Rwanda, Singapore enter financial services deal: what it means

Rwanda and Singapore last week formally entered into a partnership dubbed Financial Trust Corridor initiative, which seeks to facilitate transactions and create greater trust between financial institutions and businesses in Rwanda and Singapore.

The agreement was signed by the Monetary Authority of Singapore (for Singapore) and Rwanda Finance Limited.

The Financial Trust Corridor (FTC) initiative is expected to among other things engender greater trust, trade, closer relationships and recognition between the businesses and financial institutions in Rwanda and Singapore.

The initiative is also aimed at greater financial services and financing support for businesses in Rwanda and Singapore, including corporates, small and medium enterprises and micro-SMEs, when engaging in trade and services between both countries.

From the agreement, Rwanda and Singapore could see increased trade of goods and services.

What is a Financial Trust Corridor?

Officials say this is somewhat a new concept on the continent and was initiated not only to increase trade ties between the two countries but also the East African and South East Asian Regions.

According to the Chief Investment Officer at Rwanda Finance Limited, Ntoudi Mouyelo said that it emerged that to increase trust between business entities in the two countries, it was important to give comfort to financial institutions in the two countries to enable them release capital easily.

“We realized that one of the building blocks for trade to happen is to give comfort to financial institutions to support trade of their respective clients. Today there is no bank from Singapore operating in Rwanda and no Rwandan bank in Singapore.

“Together with the regulators, (Monetary Authority of Singapore and Central Bank of Rwanda) it has been agreed to let their respective banks exchange information within a framework called Financial trust Corridor,” he said.

How it works

For instance, Person X in Kigali would like to import goods from Singapore and reach out to their bank for trade finance credit to fund the transaction. However, their local bank may not be sure that the transaction is legit or if the supplier is real.

Lack of further details could see the bank hesitate to fund the transaction leading to the loss of an opportunity.

However, with the Financial Trust Corridor initiative, banks from both parties are reviewed and on-boarded and can share information on SMEs and businesses that are undertaking trade. This is on a special protocol that is creating trust between the two countries.

“We have considered data protection, cyber security, consent to be sought from parties involved,” Mouyelo added.

The next phases could see possibilities of foreign banks funding SMEs in Rwanda on the basis of the availability of the information.

What next?

According to officials, prior to the signing of the agreement, the two signatories held a series of consultative engagements with leading financial institutions in Rwanda keen to be part of the deal.

The Rwanda Finance Limited is in coming days set to announce banks from Rwanda and Singapore that are set to commence using the platform.

“We have also been working closely with Ministry of Trade and Commerce and the private sector to explore interest of exporters and trade platforms to use the corridor. Soon we will be announcing the first banks in Rwanda and Singapore that will be on boarding the platforms,” he added.

In the coming days, the partnership is expected to see more interest from other countries seeking to make the most of the FTC. This will further propel Rwanda towards Kigali International Financial Centre’s (KIFC) ambition to position Rwanda as a preferred financial jurisdiction for investments into Africa.

Commenting on the development, Sopnendu Mohanty, Chief FinTech Officer of the Monetary of Authority of Singapore (MAS) said that the deal places the two countries to adjust to trends of the global economy such as Data Exchange, Interoperable Payment Rails, and Consent System.

"As the global economy adjusts to an uncertain normal, it is vital to forge bold and borderless systems to help SMEs be trusted in this expanding digital landscape. Moreover, the new digital economy is based on four foundational digital infrastructures - Identity, Data Exchange, Interoperable Payment Rails, and Consent System - that will expedite Africa's huge potential to be a significant force in the global supply chain,”

“I am delighted for MAS and Singapore to partner with Rwanda Finance Limited to build the Financial Trust Corridor, to establish trusted data exchange between Africa and Asia - for greater financing, trusted trade execution and equitable economic growth," he said.

Rwanda Finance Limited has over the previous months pursuing different agreements to improve towards ambitions to position Rwanda as a preferred financial jurisdiction for investments into Africa

Among the pacts include pacts with new partners such as CDC Group, the UK’s development finance institution and impact investor, Casablanca Finance City of Morocco and Bpifrance, the French public investment bank among others.