Representatives of DFID,

Permanent Secretary of Ministry of Finance and Economic Planning,

Ladies and Gentlemen;

First of all allow me to thank the DFID for its engagement to support the initiatives of the Rwandan Government in the promotion of access to finance for the majority.  As indeed the higher level of access to finance improve the ability of poor people and SMEs to manage risks, lower their vulnerability to shocks, increase their capacity to participate in markets and augment their income.

It is known that Sub Saharan African countries in general are characterized by a low rate of penetration of financial services. In Rwanda this rate is about 21 % as its Financial Sector remains quite shallow and undiversified. Access to finance is low with only 14% of adults having access to a bank account and 7% having access to MFIs services, which bring to 21% the population having access to the formal financial services and 52% being totally financially excluded as accessed by the 2008 Finscope study.

Financial Services in Rwanda are characterised by a strong concentration in urban areas and some commercial cities located along the main roads. This kind of situation reinforces the exclusion of rural population mainly occupied in agriculture sector.  The financing of the agriculture sector represents only around 5% of the loan portfolio of banks, while it represents 16% of the total loans granted by MFIs.

The issue is how to facilitate access to financial services to the population with low incomes and SMEs in the context where this population and these SMEs are supposed to be the most involved in the agricultural sector.

It is in this line that the “Challenge Fund” has been set up to bring the necessary solutions.

But as the problem of financial inclusion is a shared preoccupation at all level of Government, it requests synergy in interventions from all the stakeholders operating at different levels, to be effective.

In this regard the “challenge fund” will intervene at the macro, meso and micro levels. ¶¶WwWWWith its intervention,  the“Challenge fund” will address the question of the transaction cost, the insufficient level of lending to the agricultural sector which constitutes one of the factor limiting access to financial services for operators in this sector.¶

The question of inadequate level of skills of MFIs managers, should be approached with urgency as it constitute another major constraint. Another constraint is the lack of long term resources to sustain increasing demand for investment financing for banks, a lack of resources for MFIs and lack of strategic alliances between traditional financial institutions and MFIs.

Representatives of DFID,

Permanent Secretary of Ministry of Finance and Economic Planning,

Ladies and Gentlemen;

We are pleased with Government policies and programs in favour of the promotion of financial access to the majority ; among them the adoption of the national microfinance policy and the national microfinance strategy, the domestic savings mobilisation strategy and recently the UMURENGE SACCO Program and the on-going modernization of the payment system. The same level of effort has been registered in putting in place a conducive legal and regulatory environment, currently¶ numerois numerous laws have been promulgated and others will be promulgated very soon.

However, specific strategies are needed in order to remove the main constraints mentioned above. New technologies and some basic infrastructures are to be set up in order to reduce transaction costs. Mechanisms of promotion of lending to the agricultural sector should be put in place like the promotion of value chain financing which is likely to involve many people at each step of the chain. This approach implies the introduction of new methods of farming, transportation and conservation of agriculture produce.

The challenge in agriculture financing lies also on the lack of capacity of rural population and SMEs to prepare bankable projects and to monitor them when financed. This population is characterised as well by low capacity to diversify the products in order to reduce theirs risks. At the same time they have problems to get access to the right information about the pricing of their products. For the banking sector, lending to the agricultural sector is highly risky and thus it is not incited to develop appropriate financial products for this sector.

In order to achieve the objective of financial inclusion, the entire financial sector has to play a driving role. In Rwanda, this is possible if strategic alliances are developed between the traditional financial sector and the microfinance sector. Thus, a dialogue between the two sectors will enable each one to be familiarized with the field of the other and to remove barriers limiting financial inclusion.

The “challenge fund” should assist the MFIs to comply with the laws in force and other laws who promote financial inclusion,¶  supporting then the central bank efforts toward this goal. Therefore capacity building of the institutions and stakeholders involved at all levels should be enhanced.

There is no doubt that the current environment is geared towards promoting access to financial services to all but numerous things remained to be completed. I am certain that the ¶challenge fund will assist us attain our goals of including low income population and the SMEs in the economic sector via financial deepening.

It is with theses words of hope that I welcome the launching of the Access to finance program.

Thanks you for your attention!

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