RWANDA: Savings Co-ops help Rwanda reach Financial Inclusion targets early

A recently published FinScope survey reveals that Rwanda has reached 89% financial inclusion, narrowly closing in on the 90% target set by its Vision 2020 plan. Since 2008, the percent of adults formally included in the financial sector has more than tripled from 21% to 68%. 

Rwanda’s dramatic rise in access to financial services has largely been delivered through the formal, non-bank sector, which includes mobile money, Saving and Credit Cooperatives (SACCOs), and insurance. Their formalization and rapid expansion is an example of how the financial system in Rwanda has become stronger, more diversified, stable, and inclusive.

The FIRST Initiative has had a long partnership with the National Bank of Rwanda (BNR), strengthening financial stability and inclusion through several technical assistance (TA) projects, delivered primarily by the World Bank as well as a number implemented by the IMF. 

Since 2005, FIRST has funded 12 projects. The Financial Sector Development Program, developed around the FSAP recommendations, has been the guiding force behind the interventions. These coordinated efforts helped catalyze over $30 million in further investments into the financial sector from the World Bank, IFC, and other development partners. 

An independent evaluation of the FIRST Initiative found that “The concentration of TA support in Rwanda in the field of regulation and supervision turned the individual grants into a more coherent program, making the whole something more than the sum of the individual parts.”

While FIRST has mostly funded projects related to stability, the initiative has helped develop several aspects of the Rwandan financial system including insurance, payment systems, pensions, credit reporting, and microfinance. Among these interventions, the IMF also implemented a number of banking supervision projects, which helped to create a foundation of supervisory capacity at the central bank’s capacity. 

As the Governor of the National Bank of Rwanda (BNR), John Rwangombwa, explained in an interview last year, “FIRST has supported us in two main areas- building our legal and regulatory framework and building the capacity of our staff… in almost all aspects of what we do.” He listed projects, which helped revise laws for banking, insurance, and deposit insurance, as well as assistance in drafting Rwanda’s first pension law. 

On each of these projects, Gov. Rwangombwa explained the key to their success has been “we are a country that has embraced reforms, and are driven by reforming whatever we are doing today.”

As an example, in 2009, Rwanda embarked on an ambitious strategy to establish a savings and credit cooperative in each of the country’s 416 districts to increase local access to finance. However, by 2011, many of the cooperatives generally lacked professional management, and were financially unsustainable beyond the initial three-year subsidies; thus, only four had been granted full licenses. The newly established SACCOs also increased the supervisory burden on the central bank. 

“When some of the microfinance institutions went bust, that’s when the Central Bank came in to start supervising microfinance institutions. We didn’t have the capacity, the know-how, the legal framework—we were starting really from zero to do that.” Governor John Rwangombwa, National Bank of Rwanda.

The Supervision of SACCOs project provided technical assistance to develop and implement adequate supervisory model and capacity for SACCOs; developed supervisory manuals, guidelines, and directives; and included guidance notes on governance, cash management, and deposit management. 

As a result, the central bank has increased supervision of the 416 previously unregulated SACCOs, and implemented a new credit policy for all SACCOs.  In addition, FIRST funded capacity building training for 80 SACCO and MFI supervisors, and provided materials for training future hires, to enable BNR’s continuous staff development. According to the FinScope report, these SACCOs now serve over 2 million Rwandans across the country. 

Today, FIRST continues to support Rwanda’s financial sector development through its first long-term programmatic grant, which launched in 2013 and will continue until through 2016. The $2 million program aims to enable BNR’s efforts to further strengthen the key building blocks of the financial sector including banking, insurance, crisis preparedness, pensions, and Savings and Credit Cooperatives (SACCOs).

One component of the program was designed to strengthen offsite supervision capacity for SACCOs, building largely on previous efforts by harmonizing reporting processes for SACCOs and MFIs. Once delivered, the World Bank’s Financial Inclusion Support Framework (FISF) has continued to support BNR with additional training for both on and off-site supervision. 

The FISF program, totaling $2.25M, also includes improvements in the payments system, MSME finance, consumer protection, and financial literacy.  

To learn more about FIRST’s partnership with Rwanda, watch this interview with Governor John Rwangombwa, of the National Bank of Rwanda.