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.