More than Rwf70 billion lies idle in savings and credit societies, co-operatives and savings groups across the country, with investors showing little interest in ploughing it back into productive ventures.
Rwanda, which is seeking to become a middle-income economy next year, has a gross domestic savings as a percentage of GDP of 10.2. Kigali hopes to raise the savings rate to 20 per cent of GDP by 2020, and trigger investment of 30 per cent of GDP.
A recent report on how to boost domestic savings shows that the country’s saving rate rose from 2000 to 2007 but has stalled largely due to private savings.
This, the report notes, has kept Rwanda’s saving rate low relative to its neighbours.
The report adds that rising household savings do not necessarily imply a rise in gross domestic savings. “It requires economic diversification and channeling the savings to potential investors instead,” the report notes.
John Serieux, a lecturer at the University of Manitoba who compiled the report said that unless Rwanda starts to attract investors to use the abundant deposits in Sacco’s co-operative and saving groups for productive investment, it will be difficult to obtain earnings from savings.
He said that there is a need to stop denying loans to the long term investors in large sectors like agriculture in order to boost savings.
“The majority of commercial banks, microfinance and Sacco’s have no interest in giving long term loans to investors in agriculture which makes growing gross domestic saving to the desired rate difficult,” said Prof Serieux. “Regular banks cater only to a fifth of Rwandans. If they can better tap into the vast pool of financial resources outside the formal banking system, more money would be available for investment.”
Officials from the Ministry of Finance and Ecoomic Planning said that despite their efforts to achieve rapid economic growth, they face challenges due to a lack of potential and skilled investors in the agricultural sector.
“We know that without enabling farmers to access finance delays growth of domestic saving and development of the country, but we are ensuring de-risking agriculture sector for financing,” said Eric Rwigamba, the director general in charge of financial sector development at the Finance Ministry.
This will be in the form of a facility in which key priority areas like crops will be developed throughout the value chain from farm to fork.