Financial Inclusion Up Close in Rwanda

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You don’t have to spend very long in Rwanda before you start to be impressed by the financial inclusion landscape in this country – not only by the progress made over the past several years, but by the scale of ambition for the rest of this decade and beyond.

The government has set a target of 90 percent financial inclusion by 2020 and the evidence of progress toward this goal is everywhere: Advertisements for mobile-money products are painted and plastered onto almost every available surface and, if you know what to look for, it doesn’t take long to spot an Umurenge Savings and Credit Cooperative (Umurenge SACCO) – Rwanda’s signature financial inclusion initiative.

Six years ago, the 2008 FinScope survey found that that 47 percent of Rwandan adults used some type of financial product or service, but just 21 percent were participating in the formal financial sector, which was at the time made up mostly of banks but which also included a handful of microfinance institutions and SACCOs.

Largely in response to these figures – and in particular to the large urban/rural divide illustrated by the data – and the government set out to establish a SACCO in each of the country’s 416 umurenges, or sectors. The Umurenge SACCO was born.


An Umurenge SACCO in Kigali, Rwanda.

With initial government support in the form of manager salaries and staff training, Umurenge SACCOs quickly began to spread across Rwanda. By 2012, FinScope data showed that the percentage of Rwandans using a formal financial product had doubled to 42 percent – an increase due almost entirely to the 21 percent of Rwandans who reported that they were using an Umurenge SACCO to save or borrow. The initiative was especially successful in expanding access to financial services outside of urban centers: As of 2012, 80 percent of Umurenge SACCO members were from rural areas.

As is often the case, however, impressive headline numbers mask considerable complexity. As part of a preparation mission for the Financial Inclusion Support Framework (FISF) program, my colleagues and I were able to visit a nonscientific sample of Umurenge SACCOs. What we saw were impressive institutions run by dedicated staff, many of them in places where you’d be hard pressed to find a bank.

Yet the challenges were clear. The manager of an Umurenge SACCO we visited in Kamonyi said that his chief concern was dealing with the inefficiencies and risks associated with running a 5,700-member SACCO on a paper-based system. Indeed, it was striking to see dozens and dozens of wooden boxes filled with members’ files in a back room. (To their credit, the Rwanda Cooperative Agency is taking initial steps to address this problem and will soon begin a pilot program to computerize 90 Umurenge SACCOs.)


Member’s files at an Umurenge SACCO in Kamonyi, Rwanda.

In a related limitation, the potential of Umurenge SACCOs is constrained by a lack of interoperability and network connectivity. A member of one SACCO cannot withdraw his or her money from another SACCO or ATM. So traders traveling to Kigali to do business must withdraw money from their local SACCOs and carry a wad of cash rather than wait until they arrive before making a withdrawal – the type of inefficient and potentially dangerous outcome that the formal financial sector is meant to ameliorate.

We also saw first-hand that high levels of formal account ownership may obscure shortcomings in product quality or value proposition. At the same SACCO in Kamonyi, close to half the savings accounts had not been accessed in the past six months, a trend that could be linked to the FinScope finding that 26 percent of SACCO members report having joined because they felt that they were obliged to. Umurenge SACCOs have also struggled to reach the very bottom of the pyramid: Just 3 percent of SACCO members are from the lowest income category (Ubudehe Category 1).

There are issues of product suitability on the credit side, as well. Qualitative evidence suggests that SACCO loans often cannot be disbursed quickly enough to meet the short-term consumption or emergency credit needs of Rwandese. And, like many financial institutions, Umurenge SACCOs must tread a fine line between managing their portfolio risk and meeting the borrowing needs of their members. This can be particularly constraining for entrepreneurs, who still need to rely on banks for larger or longer-term loans. With more advanced risk-management skills, Umurenge SACCOs may be able to play a larger role in the future for the financing of micro, small and medium-sized enterprises (MSMEs). But their current role as an entry point into the formal financial system for MSMEs is itself a significant contribution.

The recently released World Bank Consumer Protection and Financial Literacy diagnostic also suggests that much remains to be done in the realm of consumer protection. While the loan and insurance forms we saw were relatively advanced in terms of transparency and clarity, there is scope for improvement in several areas (for example, in the disclosure of the effective interest rate). These responsible lending practices also need to be institutionalized and uniformly enforced through a more comprehensive regulatory and supervisory framework.

Enter the World Bank’s new FISF country support program, designed to help Rwanda ensure the sustainability of recent gains and continue to advance toward its goal of 90 percent financial inclusion by 2020. (Unlike many other economies, Rwanda’s financial-inclusion target is based on the percentage of Rwandans using any financial service, including informal ones – a nod perhaps to the popularity of Village Savings and Loan Associations and their role in providing structured savings and helping Rwandese graduate to formal providers like SACCOs.) FISF support will consist primarily of technical assistance and capacity-building in five key areas of financial inclusion: MSME finance, consumer protection, financial education, payments, and monitoring and evaluation.

The specifics of these activities are still being worked out with the World Bank Group’s counterparts, but one thing is already clear: The government’s commitment to achieving its ambitious targets, and the momentum created by Umurenge SACCOs and other initiatives, make it a very exciting time to be working on financial inclusion in Rwanda.



Douglas Randall

Senior Financial Sector Specialist

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