Finance growth and jobs

Rwanda Leasing Capacity building project


There is significant demand for financial services especially in rural areas, yet the formal banking system has been unable to fully fill the gap for safe savings and short-term credit, for both productive activities and consumption. The types of financial services needed by rural MSMEs, such as smallholder farmers, include working capital, credit, savings, pensions, insurance, and money transfer services.). According to finscope 2020, Some 93% (about 7 million adults) of adults in Rwanda are financially included but despite increasing financial inclusion there is a need for appropriate and accessible financial instruments to enable MSMEs to run their businesses, acquire assets, build savings, stabilize consumption, and shield themselves against risks. Traditionally vulnerable groups such as the poor, those residing in remote rural areas, women, and the youth are more likely to be financially excluded. Services such as Micro leasing allow the acquisition of productive assets which generate income and realize profits.

Despite the various interventions by the GoR to provide a suitable regulatory environment, financial institutions (FIs) have been reluctant to finance leasing because of reasons that span from limited internal skills and knowledge in leasing to secondary market fears; uncertainty of market demand and identification of assets with potential for leasing; assets supplier dependability; difficulty of tracking clients and assets; and the capital adequacy of MFIs and SACCOs. As far as commercial banks are concerned, there is lack of appetite for engaging in the lease financing for reasons like: a) negative past experiences including lack of understanding of the product including inherent risks and lack of additional collaterals, b) unclear and unfavorable legal, tax, regulatory and accounting frameworks; c) lack of liquidity. It is from this background that AFR supported Business Development Fund (BDF) to build internal institutional capacity to demonstrate to the wider market that leasing has potential in Rwanda by establishing a leasing unit.

In a bid to support the market to address these constraints, AFR Investment Committee approved the Rwanda Leasing Capacity Building project to support Business Development Fund (BDF) mainly to demonstrate that leasing finance has potential in Rwanda. From March 2019 to February 2021, Access to Finance Rwanda supported Business Development Fund (BDF) to develop and strengthen their institutional capacity to effectively provide leasing product on the Rwandan market. Among other interventions, AFR supported in developing leasing related policies and procedures, leasing product structure and characteristics and capacity building to BDF staff. AFR also provided financial and technical support to Rwanda Development Board (RDB) in developing the instructions and tools determining the requirements for registration, amendment and cancellation of finance lease agreement and the cost of these services, as provided in the Finance Lease Law.

Project results

  • A leasing unit was set up at BDF and currently supporting the leasing business/operations of the institutions. The fully-fledged Leasing Unit within BDF is assigned to provide finance lease facilities to the Rwandan businesses with viable projects in the different sectors of the economy, including micro leasing. Licensing of the leasing business within BDF to comply with all prudential regulations is under way.
  • The project provided training to 75 (31 women) staff of BDF. The staff included the Leasing team, Branch Managers, Branch Investment Analysts and Head Office Mid-level Staff. The staff were trained mainly on 1. Introduction to leasing, 2. Risks inherent in leasing, 3. Internal policies, processes, and procedures; and 4. Leasing operations including credit.
  • The leasing related policies and procedures to be incorporated in the risk management policies and procedures of BDF were developed.
  • The BDF business plan, sales and marketing strategies and action plan were updated. The business plan includes a new product development summary sheet.
  • Leasing product was refined and enabled BDF to attract more Small and Medium Enterprises (SMEs) in different sectors ranging from carpentry, garment, and leather.
  • BDF is in the process of creating another pipeline of 159 projects of youth companies under the new micro lease product that will provide jobs to 13,197 people.
  • AFR provided financial and technical support to RDB in developing the instructions and tools determining the requirements for registration, amendment and cancellation of finance lease agreement and the cost of these services, as provided in the Finance Lease Law. One of the tools sought by RDB is a centralized and electronic registration system for registering the leases and related contracts and documents.
  • The support to develop a web based Financial Lease Registration Information Management System is ongoing.

Key lessons learnt

  • This intervention experienced significant delays in acquiring the leasing license from Central Bank. This delay had a negative effect in the implementation of the project especially the full roll out and Launch of the product.
  • AFR and BDF have learnt that for sustainability of the project, AFR should continue to play a facilitation role by convening all the leasing stakeholders and work through to a consensus on the optimum tax strategy. This same forum could create the grounds for cooperation on sensitization of the market and act as an ongoing forum for coordination and lobbying for government.

Project overview/Key highlights:

Project name Rwanda Leasing Capacity building project
Implementing partners Business Development Fund (BDF)
Project period (2 years) March 2019 – February 2021
Project targets
  • Setting up of a fully registered and licensed leasing company under BDF in operation.
  • Strengthen the capacity of staff within BDF leasing company for the delivery and management of the leasing finance.
  • Develop new gender focused leasing products and support on marketing of such products to the various market segments.
  • Develop specific gender responsive leasing policies, procedures, processes, and tools to guide appraisal, disbursement, monitoring, and other credit administration activities.
Project performance targets
  • Two hundred (200) SMEs are able to access leasing products from BDF leasing company/Unit.
  • At least 1,250 jobs created through the entire leasing value chain (30% women, 20% youth)
  • At least 25 BDF staff trained and certified on leasing finance.
  • Business incubation facilities set up
  • 2 leasing finance products developed and promoted to the people in SMEs.
  • 1,250 people involved in Agriculture sector benefit from leasing products developed and accessed through AFR support
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