The government is set to unveil a set of products to encourage the savings culture among Rwandans. The move is expected to make the public more involved in the development agenda of the country.

If the public responds positively to the plan, the government said, the national gross savings rate would increase to 20 per cent of the GDP in the next seven years, up from the current 13.2 per cent.

Key among the approaches is the establishment of provident and unit trust funds, reforming the pension system and increasing penetration of the insurance industry from the current 2.3 per cent to five per cent by 2020.

Contribute and pool savings

Provident funds, the government argues, will enable employers and employees to contribute and pool savings for future investments.

Unit trust funds are a form of collective investments whose profits are usually passed on to individual owners. The funds are set up under trust deeds and the investor is the beneficiary.

Unit trusts would enable citizens to buy small amounts of units, hence giving them an opportunity to invest, while reformed pension would see the emergence of private pension schemes for self-employed individuals.

“Savings are needed in order to finance investment” Minister for Trade and Industry, Francois Kanimba, said.

Inspired by the improved financial inclusion levels due to the recent rollout of Umurenge saccos, the government wants to increase the current financial access from 42 per cent to 80 per cent in 2017 with a view to reducing currency in circulation outside the financial system.

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Mr Kanimba said during the just-concluded National Dialogue that the current ratio of currency in circulation to money supply, or broad money, is 14.2 per cent, down from 15.9 last year. He added that the target is to reduce it further to 10 per cent by 2017.

To achieve the objective, the minister noted, there is a need for robust interventions that will increase the number of bank account holders from 3.6 million to 5.5 million – or 80 per cent of the total working population – by 2017, expand electronic domestic payment system and conduct massive financial literacy campaign.

The government also hopes to increase insurance penetration to 4.1 per cent by 2017 and five per cent of GDP by 2020, respectively, with insurance premiums grossing at Rwf70 billion (2.3 per cent of GDP) in 2011 and projected to increase to Rwf110 billion (2.6 per cent of GDP). Should the plan materialise, the insurance sector would make available Rwf299 billion (4.1 per cent of GDP) in 2017 and Rwf506 billion (five per cent) by 2020 in savings, he said.

“If 1,000 among the existing 5,000 co-operatives target to save Rwf50 million on average for investments annually, they will generate a total of Rwf50 billion, which would be good for the economy,” said Mr Kanimba.

Supporting savings as a vehicle for economic growth, Mr Kanimba says should a million working citizens save Rwf100,000 it would boost national savings to Rwf10 billion annually while 300,000 self-employed citizens with a monthly income of Rwf100,000 can sign up six per cent for savings could raise a capital outlay of Rwf21.6 billion per year.

Governance challenges

A recent survey by the government indicates that 31 of the regional investment groups (RIGs) studied had a total layout of Rwf70 billion, 50 per cent of that being ongoing investment. However, to effectively play this crucial role, RIGs will have to overcome corporate governance challenges.

The schemes have also seen the government transform the national solidarity fund, Agaciro Development Fund, into a sovereign wealth fund managed by professionals to ensure it transcends generations.