Rwanda Economic Update - Mobilizing Domestic Savings to Boost the Private Sector in Rwanda (English)

The Rwanda Economic Update edition 22 reviews the country's macroeconomic performance and prospects and includes a special section focusing on Mobilizing Domestic Savings to Boost the Private Sector in Rwanda. In 2023, Rwandan economy demonstrated resilience, achieving a 7.6 percent growth in a challenging global environment. This growth was largely attributed to the services sector and sustained domestic demand despite agricultural setbacks and persistent inflation. However, Rwanda faces a challenge in mobilizing domestic savings-critical for private sector investment and achieving the goals outlined in Rwanda's Vision 2050. While financial inclusion has risen sharply, with significant transitions from informal to formal savings methods, Rwanda's savings rates remain low compared to regional peers. The government has undertaken measures to incentivize savings, including tax benefits and the introduction of the Ejo Heza long-term savings scheme. These measures have been complemented by an emphasis on financial education, particularly digital literacy, to align with the expansion of digital financial services (DFS). Despite these efforts, substantial potential exists to enhance savings through strategic regulatory reforms. Policymakers should focus on creating an enabling environment for innovation in the financial sector, supporting the integration of non-banks into the payment system, and fostering customer-centric product development. There is also a need to reduce the high costs of remittances, leveraging the East Africa Payment System and engaging the Rwandan diaspora in capital markets. Furthermore, enhancing gender-focused financial services and collecting sex-disaggregated data are essential to address the unique challenges faced by women, particularly in rural areas, and to harness their economic potential. Rwanda's policy landscape can thus be enriched by targeted interventions to stimulate savings, leveraging the strengths of its growing digital economy, and addressing the financial needs of its population. These efforts, requiring cross-sectoral collaboration, can lead to an inclusive financial system that supports Rwanda's broader economic development objectives.