Rwanda Impact Area:
Fin-Tech for Agricultural Growth
Are you inspired to explore innovative mechanisms of financing micro, small and medium enterprises (MSMEs) in agriculture and scaling their impact on Rwanda’s food systems? Do you have a talent for technology or a desire to go digital? Are you an entrepreneur of your own agribusiness start-up? Or are you employed at a bank, work in private equity, corporate venture capital, or invest in agriculture? If so then apply! The African Food Fellowship is looking for solutions to remove stubborn barriers in agri- businesses’ access to finance and to support a flourishing ecosystem of innovation in financial service provision to contribute to a fair and competitive agricultural sector in Rwanda.
01. What is the current state of FinTech in agriculture?
Access to financial services in Rwanda is considered a major bottleneck in the growth of the agricultural sectors. Agriculture provides a livelihood to more than 60% of Rwanda’s population and about 30% of the country’s GDP. Nevertheless, the National Bank of Rwanda reports that only 6% of commercial lending goes to agriculture. Several factors hinder access to formal credit, including delays in loan approvals, which in-turn leads to cash flow problems, the seasonal and cyclical demands of agriculture for working capital, a lack of data on financial performance, and strict lending requirements and rigid governance structures, according to IPAR-Rwanda. Collateral requirements are often extremely high, ranging between 125% and 200% loan values. Similarly the cost of borrowing is very high, with interest rates ranging between 18% and 20% per annum. USAID argue that current borrowing from commercial banks is predominantly for pre-harvest working capital, that most investment goes into maize, rice, dairy, tea and coffee value chains, and that support to MSMEs producing and marketing potatoes, beans, and horticultural products is almost non-existent.
02. Is there hope?
There are promising trends. Key national strategies, development plans and initiatives have aimed to expand agri-finance provision, including NST1, PSTA 4, FSDP 2, EDPRS 2 and Vision 2020. At the end of 2017, 1.2 million users of mobile banking services were recorded, approximately 10% of Rwanda’s population. New promising innovative and digital products are also surfacing. For example, weather- based crop insurance, business development funds and warehouse receipt systems, using mobile apps, reach more and more farmers each day. The Smart Nkunganire System (SNS) manages cashless transactions of subsidy and supply of agro-inputs to farmers, and small loans and savings are also made possible through KCB’s Mobile App.
03. What is the challenge to food systems leaders?
Whilst bottlenecks on both the demand and supply ends of credit provision exist, loans are not the only way to finance investments. Several opportunities can be explored. Boosting investment in agriculture requires systems leadership and systems leaders capable of identifying financing opportunities in the public and private sectors, and linking the two. It requires building relationships with financial institutes and changing opinions about agri-finance. By investigating new products and the role of digital in shifting the balance from risk to reward, you may emerge as one of the architects of Rwanda’s agri-finance future.