During the pandemic, there has been a narrative that Covid-19 has completely altered the landscape of Rwanda. It is a statement that definitely holds strong validity but in some respects, Covid-19 has also strengthened a number of pre-existing trends in our country. For example, we are a nation which has historically placed value on the impact of technology, so the push to adopt tech-enabled services such as mobile payments and e-commerce during the pandemic does not feel unprecedented.
While Covid-19 has magnified the development of certain sectors, it has revealed the long-standing limitations of others, in particular the informal retail sector. According to the National Institute of Statistics for Rwanda (NISR), the informal economy accounts for at least 50 per cent of economic activity in the retail sector. Despite their importance to local communities, informal retail shops routinely run out of products, face difficulty receiving goods, and lack access to basic financial services.
With the restrictions on movement, Covid-19 has only worsened these issues, creating major shortages for not only shop owners, but also the communities who rely on them. While medium and high income households can afford to shop online, poorer families still heavily rely on informal shops as they cannot afford to purchase goods from larger retailers or do not have the means to order online. This has resulted in severely marginalized communities with limited access to essential goods such as rice, flour and soap.
Now more than ever these inefficiencies need to be addressed and with the logistical roadblocks caused by Covid-19, technology can play a key role in bridging this gap. A good example is the distribution of e-vouchers, which provide vulnerable local shops and households with access to essential goods. Low-income families can receive e-vouchers via SMS which can be redeemed at nearby shops. Once the goods are received by these families, the transaction is confirmed via an app and the shopkeeper is instantly credited digitally for the goods issued.
This direct digital assistance eliminates the logistical challenges and costs that would normally be faced during relief efforts, while also helping shop owners to increase sales and maintain revenue. This approach has enjoyed success in Kenya, with participating shops seeing their average weekly sales increase by 54 per cent. Additionally, technology affords informal retailers full access to the benefits of digitised orders. Through online distribution platforms, shop owners receive real-time tracking of orders, faster delivery, and access to financial services such as digital wallets and lines of credit.
We can see the impact of this through the following scenario. Fred owns a shop in one of Kigali's informal settlements and has experienced a drop in sales due to the lockdown. With the advent of online retail platforms and apps that directly connect him to manufacturers, he has access to retail trends that reveal which goods are in highest demand and can place orders without having to travel. Once the goods are ordered, he doesn't have to worry about whether they've gone missing as he has full visibility on their status and has assurances he'll receive them before his current stock runs out.
Through mobile money platforms or e-vouchers, he has the safer option of receiving payments without handling physical cash or taking time away from his business to collect his goods. At each stage of the process, technology is placing more control into the hands of the shop owner so they can make the right decisions for their businesses.
It's also worth stressing that technology holds great value for shop owners even when the pandemic draws to a close. Understandably, due to the weaknesses of their supply chains and limited access to financial services, they were not well-positioned for growth even before Covid-19 began.
The rise of digital finance and e-commerce means small shop owners no longer have to be marginalised by traditional banks and manufacturers. They can receive access to credit in a matter of minutes as opposed to going to the bank in person and filling out numerous forms. They can receive small quantities of stock delivered directly to their stores. If these businesses are to thrive, it is critical they are provided with the right digital tools and resources to expand.
The economic disruption caused by the global pandemic will be temporary however it will undoubtedly leave a lasting impact on the nature of trade in Rwanda. Now is the time for informal retail to take a step forward and if successful, a new wave of welfare awaits not only shop owners but also the communities they serve.