A new report has revealed that overall financial inclusion among the youth increased slightly from 86 percent in 2016 to 88 percent in 2020 meaning that only 12 percent of the youth are financially excluded.
It shows that 31 percent or 650,751 Rwandan youth are banked up from 24 percent ( 559,862) in 2016 are using products or services from licensed commercial banks regulated by the central bank in 2020.
The report dubbed Rwanda Youth Financial Inclusion Report was produced by Access to Finance Rwanda (AFR) in partnership with National Bank of Rwanda, Ministry of Finance and Economic Planning and National Institute and of Statistics Rwanda.
Education, employment, income generation is one of the main drivers of financial inclusion according to the analysis.
The analysis findings were presented on August 26 as part of the Access to Finance Rwanda LEAD series, which is organized with the aim of engaging participants in stimulating discussions on a range of topics pertaining to pressing issues in Rwanda’s journey to the financial sector development and economic transformation.
This month's LEAD series was organized by AFR in partnership with the Ministry of Youth and Culture and MasterCard Foundation.
Through the platform, AFR in partnership with MasterCard Foundation and Ministry of Youth and Culture intend to bring experts involved in youth economic empowerment to dialogue and share best practices and interventions that can facilitate youth financial and economic inclusion to support Rwanda’s economic transformation.
The event was in line with the celebration of Youth International Day and the launch of the Finscope 2020 Youth thematic report.
According to the report, approximately 66 percent of youth borrowed money in the past 12 months prior to the survey.
Only 16 percent, it shows, borrow from formal financial institutions meaning that most of the youth are excluded from the formal credit market.
Around 50 percent of youth save with formal financial services providers while 55 percent save using informal mechanisms such as savings groups like VSLA, tontine, or Ikimina (saving association).
Most savings in youth, according to the analysis, are for non-developmental purposes adding that the creation of appropriate products is likely to help in shifting savings towards developmental purposes.
The report findings indicate that 63 percent own mobile money accounts and only 43 percent are active in using them.
"Mobile money presents an opportunity to expand financial inclusion among people that are excluded from the market,” it says,
It says 18 percent own a bank account and 82 percent of them are active and have high usage than the rest of the population of 79%.
About 12% of the youth have access to insurance products from formal financial institutions up from 7% in 2016meaning 88 percent are excluded.
Recommendations
The report recommends increasing access to post-secondary education is critical in building a knowledge-based economy.
It says establishing a catchment programme that up-skills the youth after completing their education will facilitate a transition from education to employment It recommends supporting young business owners to avoid premature death of businesses and introducing affordable credit products which could likely increase usage of credit.
Youth financial inclusion strategy should focus on people in rural areas and those in lower-income quintiles, recommends the report.
The recommendations also include leveraging technology to provide financial services and introduce new products since the youth own businesses in the agriculture (21.2 percent youth) services sectors (45.9 percent) than the rest of the population, and increased entrepreneurship in these sectors would have a positive impact reducing youth unemployment, recommends the report.
Given the informal mechanisms exhibiting higher risk exposure, efforts directed towards tailoring formal savings products to suit the needs of youth is likely to attract the youth in developing a culture of saving formally, it adds.
The report warns that such informal mechanisms exhibit higher risk exposure.
Jean-Bosco Iyacu, the CEO of Access to Finance Rwanda said that research is vital to provide evidence within the financial sector in Rwanda.
"In regard to youth financial inclusion, there is a need for investment in young people in Africa and particularly Rwanda as it is paramount for the foundation. We have to make the financial sector more inclusive,” he said.
He said that it is very paramount that different stakeholders come on board to support the youth.
Emmanuel Bigenimana, the Permanent Secretary at The Ministry of Youth and Culture said that with partners, the ministry is implementing various programs to promote youth financial inclusion.
"These include instilling the culture of saving among other forms of financial education from an early age, mainstreaming the financial literacy in every youth-related program among others,” he said.
"The 12 percent that still is excluded need to be financially included through inclusive policies and strategies. We have also noted that the majority of youth are excluded from formal credit. Informal credit from illegal money lenders commonly known as "Banque Lambert” poses risks. That is why we need to collaborate, empower and support youth to be formally financially included,” he noted.
He added that providing financial literacy is also integrated into different projects and programs.
"We are very happy with the journey made towards Youth Financial Inclusion but now we shall look beyond numbers of youth with bank accounts & access to formal financial services. We need to ensure that they are really financially included with better employment,” added Rica Rwigamba, Country Head of Mastercard Foundation.
She added there is a need to empower young entrepreneurs to embrace digital solutions in their businesses.
"Digital literacy, e-commerce is an important skill for youth to access information and finance,” she said adding SME response is a commendable intervention.
Regis Umugiraneza, the Vice-Chair of Chamber of Young Entrepreneurs at Private Sector Federation (PSF) and member of Rwanda Youth in Agribusiness Forum (RYAF) said that there is a need for easing youth access to finance.
"We are still struggling to access loans, especially when it comes to providing collateral,” he said.