Financial Inclusion in Rwanda: Interview with Governor Rwangombwa
Over the past decade, FIRST has contributed to strengthening Rwanda’s financial system in a substantial way through several projects implemented by the World Bank Group and IMF. These include two Financial Sector Development Strategies (FSDS), nine Technical Assistance projects (TAs), and one Program which is still on going. Most of the TAs have focused on financial regulation and supervision in the banking, microfinance/SACCO, insurance, payment systems, and credit reporting.
According to FIRST’s most recent independent evaluation, the financial system in Rwanda has become stronger, more diversified, stable and inclusive, and FIRST’s projects have made substantial contribution to that outcome.
To learn more about Rwanda’s financial sector development, please watch this interview from with Governor John Rwangombwa. (Interview Date: April 16, 2015)
Q1: How has FIRST contributed to Rwanda’s financial sector reform agenda?
FIRST has had good experience with Rwanda and more specifically, with the National Bank of Rwanda since way back in 2005.
We have worked with FIRST to build our legal and regulatory framework, and reform it; and we are still doing that. But also to position the central bank as a regulator, not only focusing on stability, but also focusing on inclusion.
Q2: How has FIRST enabled the National Bank of Rwanda as a financial sector regulator and supervisor?
FIRST has supported us in two main areas—building our legal and regulatory framework, and building the capacity of our staff. We have worked with FIRST Initiative to support building the capacity of our staff.
For example, when the Umurenge SACCO came in and when we had challenges in 2006, when some of the microfinance institutions went bust, that is when the Central Bank came in to start supervising microfinance institutions. We did not have the capacity, the know-how, the legal framework—we were starting really from zero to do that. And we are happy that FIRST supported with us to put up all this.
Now when I talk of the legal and regulatory framework, we have worked with the central bank in almost all the spheres of what we do. We have worked with them to revise our banking law and the related implementing regulation is in the pipeline. We have revised our insurance law, which is also in the pipeline.
Together with these implementing regulations, we worked with the central bank to have our first pension law, which has just been passed by parliament. Now working with them on the implementing regulations. We have worked with FIRST on the deposit insurance, which is new in Rwanda, the law has just been passed. We are working with them on the institutional framework, on how we start implementing this.
All this really helps us to really stabilize and build the financial sector in Rwanda.
Q3: Why are Savings and Credit Co-operatives (SACCOs) important to the financial sector development of Rwanda?
In 2008, we did the FINSCOPE, our first FINSCOPE; and as I said, 58% of our population were excluded from financial services. So, SACCO came in as one of the solutions to have financial services near to the population.
We have 416 umurenges [sectors] in Rwanda, and we had these microfinance or savings co-operatives scheme in every umurenge—supported by government, owned by the population.
When we did the second FINSCOPE survey in 2012, the total excluded had moved to 28% and our objective is to move financial inclusion to 90% by the year 2020.
So, Umurenge SACCO has really supported this initiative of access to finance for all Rwandans. But the other part that it is helping is to raise savings. We still have challenges of savings in our country.
So, the more people we have accessing financial services, and the more programs we put there, the more we build our savings within our country.
Q4: What is the state of SACCOs today?
We have really had good progress of the SACCO sector in Rwanda today. When they started, the government was paying for almost everything—for their operations cost. Today, out of 416, I think as of end of last year, we had 396 now fully independent.
When we look at the numbers, by the end of the year  we think every SACCO will be fully independent. They are able to generate revenue that supports their operations, and in fact, gaining profits. So, this is a big achievement in terms of the stability and sustainability of the Umurenge SACCOs.
The other point that we want to address is— today, a client of an Umurenge SACCO in eastern Rwanda, if they move to western Rwanda they cannot access their money. So what we want to do is to really enable them to access their money, wherever they are in the country.
So what we are doing is to create an institution that will link up all 416 SACCOs into a co-operative bank. Therefore, they will be able to link their operations. The government has hired a firm to develop and link all these SACCOs with one IT solution.
I would say that we are happy as a country that this initiative has really grown into something big, much bigger than was even expected, and that is having a good impact on the lives of the population.
Q5: Finally, what do you see as the critical success factors in implementing financial sector reforms and what have been the biggest challenges?
Talking the Rwandan experience, I think the most successful factor is that we are a country that has embraced reforms, and are driven by reforming whatever we are doing today.
The reform we are doing is not just around the financial sector, it is everywhere in our lives as Rwandans today. Therefore, that makes it easier for anybody to be part of any reform agenda we bring up.
So, we need that ‘political will’ from the highest institutions of the country, to be able to drive the reform culture in the country. That has been a key factor.
Coming specifically to financial sector reforms, we need a champion. Central Bank can champion the reforms, but we need the Ministry of Finance to be on board 100%.
And then, you need to work with all the stakeholders. Not just pushing the reforms on them, but having them from day one.
As we were developing the Financial Sector Development Plan (FSDP), we had all the key stakeholders—the private sector, and the other government institutions we were working with, as part of our efforts to come up with a clear program.
We are also good at having clear targets we want to achieve. So, from day one, we wanted to achieve 90% financial inclusion in Rwanda. So, that is a clear target, we know what we want to achieve in our Vision 2020.
Then, the other point, which is beyond FSDP, that we have achieved as a country, is owning our programs. The World Bank, FIRST Initiative, and the others come in to support our efforts.
We remain in the driving seat. We remain leading the efforts. And we hold ourselves accountable for achieving the results. They come to support us, but we are responsible for the results.