Rwanda is still very much a nation working towards recovery. In 2000, nearly two-thirds of the population was living below the national poverty line. Five years later, poverty rates remained at nearly 60 percent. However, Rwanda has experienced positive and rapid growth since then, with poverty rates having dropped to 45 percent and still decreasing.
Figure 1: Declining poverty rates in Rwanda
As development indicators have been improving in Rwanda, so has the expansion of access to financial services. In order to assess the current state of financial inclusion in Rwanda, MIX has compiled all publicly-available data to map the financial sector and provide a view of the types of financial actors reaching certain types of clients around the country. We collected data on 785 formal and informal financial institution branches for 2011 - 2012 to gain a comprehensive view of financial inclusion across Rwanda.
Figure 2: Map of the financial sector in Rwanda
According to the World Bank’s Global Findex, only one-third of the adult population had an account with a formal financial institution as of 2011, while the most recent FinScope survey of Rwanda from 2008 shows more than half of the Rwandan population as financially excluded. Both surveys indicate that when compared with the rest of East Africa (Kenya, Uganda, Tanzania, Burundi), Rwanda was second to only Kenya for the percent of the population financially served. For the 2008 survey, more than half of those participating in financial services did so through informal arrangements. However, formal banking services are expanding with new clients and new products.
Figure 3: Global Findex results for Rwanda
Total assets of the banking system in Rwanda have nearly doubled since 2007, reaching US$924 million by the end of the first quarter in 2012. Foreign investment in the banking sector has been increasing over the last five years alongside local growth and generating greater – although still relatively weak – competition in the sector. Three national banks account for half of the banking sector assets, while six foreign banks account for the other half. The largest bank, Bank of Kigali, accounts for nearly a third of total banking assets. By continuously working to update delivery channels, such as through agency banking and mobile banking and expanding product lines to reflect client demand, national and international banks have managed to build a footprint across all five provinces in Rwanda, reaching 22 of the 30 districts.
Table 1: Number of branches and agents by Province
|MTN Mobile Money Agents||104||49||32||54||60||299|
However, while banks reach 22 districts, they are still heavily centered on Kigali, with over 40 percent of branches within the city limits. At the same time, licensed microfinance institutions (MFIs) are also clustered around the capital. While MFIs reach 23 districts, one third of these branches are within Kigali. Poverty rates in Kigali are significantly lower than in all other provinces so the financial institutions can benefit from both better infrastructure and higher end clientele, which enables greater efficiency and lower costs.
SACCOs, on the other hand, are a more informal type of institution with a particular focus on reaching poor clients in rural areas. Unlike banks and MFIs, Kigali actually has the fewest SACCO members and the lowest member savings of all provinces. The Central Bank is mandated to supervise SACCOs nationwide and has created a grassroots savings mobilization scheme called Umurenge SACCO. SACCOs are recognized as widely accessible and have been a fundamental part of the expansion of the provision of financial services to rural areas. The Minister of Trade and Industry, Francois Kanimba, expressed optimism regarding the recent healthy growth of Umurenge SACCOs. He stated that it will translate into rural financial inclusion, increase credit needed to support rural-based micro businesses and projects, and play a key role in the support of the agricultural industry. In fact, Umurenge SACCOs triggered increased credit extension to rural based agro-businesses to RwF5.2 billion (US$8.7 mil) by November 2011 from RwF 818 million (US$1.4 mil) in 2010.
Mobile banks are another way to support SACCOs, which at times have large amounts of deposits but are unable to access banks to place these deposits, thus exposing them to high risk and theft. One way mobile financial operations are taking place is through vans stationed in rural areas to help the SACCOs access banking services by depositing, withdrawing and delivering money.
In addition, all five main commercial banks currently offer mobile banking, an initiative aimed at reaching underserved clients particularly in the rural areas, where mobile penetration rates are relatively higher as compared to that of formal financial institutions. MTN, Rwanda’s largest telecom company, has over 310,000 clients using mobile money, and according to MTN’s Mobile Money Manager, Albert Kinuma, over 60 percent of their agents are currently based outside of Kigali.
While Kanimba expects new strategies and ideas from financial institutions to boost the availability of financial services to the poor in rural areas, the Executive Secretary of the Association of Micro Finance Institutions of Rwanda (AMIR), Rita Ngarambe says, “The rural poor who constitute 85 percent [of the population] have been discriminated against in accessing financial services through banks due to financial illiteracy and accessibility.” However, Ngarambe anticipates that these types of new products, along with the financial literacy training linked to the Umurenge SACCOs will promote financial inclusion for all.
The National Bank of Rwanda aims to become a middle-income country by 2020, targeting 80 percent access to finance by 2017. This would be an increase of roughly 30 percent over the next five years, with the greatest room for expansion in the rural areas. The four provinces outside of Kigali, home to 90 percent of the population, lack deep outreach from formal financial institutions, as seen in figure 4 below. However, with the growth of the mobile banking industry and the strengthening ties between mobile service providers and commercial banks, perhaps the costs of setting up new branches can be avoided.
Figure 4: Outreach by province (population under poverty line vs. points of service)
“Given the pace at which Rwanda’s financial sector is evolving, our targets are high but achievable,” says Central Bank Governor Claver Gatete. The ease of doing business in Rwanda is a strong step in the right direction – it ranks third across sub-Saharan Africa in the Ease of Doing Business ranking published by the IFC and World Bank, second to only Mauritius and South Africa. Likewise, Rwanda comes in first in the category of Starting a Business and second in Getting Credit. As the financial sector strives to expand products and services to reach the underserved population, Rwanda is progressing positively and seems to be on the right track to towards achieving its goals.