April 18, 2023

Bank loans for over 300 Rwandan agri-entrepreneurs leads to 600 new jobs

Many micro, small and medium-sized enterprises (MSMEs) in Rwanda were heavily affected by the COVID-19 pandemic. The GWIZA project supports the resilience of MSMEs through training sessions and helps them to access finance through a guarantee mechanism. So far, 311 MSMEs received loans, creating 300 direct and 600 indirect jobs.

“Talking and getting to know the different small business owners, I was thrilled. It was eye-opening to see these inspiring entrepreneurs be able to do something that they did not think was possible to do before” said Igor Kana, Project Officer in Rwanda, describing SPARK’s GWIZA project in partnership with the Swiss Agency for Development and Cooperation.

The GWIZA Project was launched as a response to a problem that failed the globe: the economic recession that came hand-in-hand with the COVID-19 pandemic. According to the World Bank, Rwanda’s gross domestic product (GDP) fell by 0.2% in 2020, which is a significant contrast to the initially projected growth of 8% before the pandemic. This significantly increased poverty rates, with 1.3 million people falling into temporary poverty, primarily in rural areas. 

“The banks’ appetite to assist MSMEs in Rwanda is almost non-existent.”

Micro, small and medium-sized enterprises (MSMEs) remain a vital engine of growth in Rwanda, contributing up to 55% of the country’s GDP and employing around 41% of the population, particularly in the leading sectors of agriculture, energy, cross-border trade, hospitality, and financial services. They, too, have been disproportionately affected by the pandemic and require assistance to recover from the economic impact. One of the main challenges for MSMEs everywhere is access to finance. However, the path to accessing bank loans is littered with obstacles, especially for MSMEs in Rwanda. In fact, Igor Kana states, “The banks’ appetite to assist MSMEs in Rwanda is almost non-existent.”

Banks demand high collateral requirements and excessive documentation, yet deliver inadequate financial products and loans with high-interest rates, which leaves a lacking business ecosystem to support entrepreneurs. In collaboration with the local government, local institutions and Equity Bank, the GWIZA project addresses these challenges by providing two main components, capacity building and access to finance for MSMEs in diverse sectors such as small livestock, agriculture, fisheries, construction materials and cross-border trade. The result is tailor-made financial products that fit each business’s needs. In just one year, this project has already made a significant impact by providing financial assistance to 311 MSMEs and creating 300 direct and 600 indirect jobs. 100% of these jobs have been safeguarded.

Training and access to financial services
The GWIZA project offers technical assistance to MSMEs. This includes training entrepreneurs on how to manage loans, budgeting and digital management. Through the training and field visits, over 1,000 business owners have been trained to manage their documents better. These training sessions were also crucial in identifying eligible MSMEs that could qualify for loans, making it faster and easier for the project to approve loans in a matter of weeks.

Entrepreneurs receive trainings © 2023, SPARK

Moreover, SPARK collaborated with Equity Bank, a commercial bank in Rwanda, to reduce the average interest rate on loans from 18% to 10% and to waive high collateral requirements, making it easier for MSMEs to obtain non-security loans. This gave entrepreneurs a chance not just to relaunch their businesses, but also to diversify their services and products, scale up production, open new businesses and create more jobs.

MSMEs repaying loans faster than expected
Uwingabire is a woman with a disability. With the support of the GWIZA project, she started two businesses in the sugarcane and coal sectors. Despite having two years to repay her loan, Uwingabire predicts she can repay it within 6 months given that her sugarcane business had a 70% return on investment within its first few months. She has now created two new jobs in her community and plans to apply for another loan to buy a truck so that she has complete control over her value chain.

Her increased income has also enabled her to renovate her home. For years, she had been living in a house without cement and struggling to make ends meet. She was overwhelmed with emotion the day she walked into her newly renovated home. As Uwingabire proudly says, “I can now feed families with just one hand.”

Uwingabire Marthe standing in front of her rented 5-hectare land to cultivate sugarcane © 2023, SPARK

Women’s inclusion
Part of her success is due to the project’s intricate care for including women, who comprise 70% of the participants. Working with cooperatives and associations made up of single and teenage mothers, the GWIZA project has provided training to over 150 women. In addition, the programme includes 1.5% insurance to repay loans for at least 3 months when women are unable to work during pregnancy or other obligations such as taking their children to a hospital.

Marie Jeanne, another loan recipient, was able to benefit from this programme. With a $3000 loan, she was able to buy two bicycles to run a bike cab. This helped her sell more products at her mini supermarket, increase her cash flow and hire three jobs all while being pregnant. She knew that her pregnancy would hinder her ability to work and earn a living for a while, which would affect her profits and, as a result, her ability to pay back the loan. To ensure her children would not lack milk for their growth after she gave birth, she wisely invested in a cow. Thanks to the GWIZA project’s insurance coverage, Marie Jeanne can feel secure knowing that she had an extra guarantee in place.

Marie Jeanne in her mini supermarket © 2023, SPARK

De-risking MSMEs for future financial access
In just one year, SPARK and SDC’s work with Equity Bank has distributed over 641,335,000 Rwandan Frank (the equivalent of $577,556.80) in loans to MSMEs. By successfully repaying their loans within one year, many of these small businesses have proven their creditworthiness and gained the trust of financial institutions. This could potentially lead to other MSMEs being de-risked by banks, who can benefit from financial support to scale their companies, create new jobs within their communities and contribute to growing the Rwandan economy.