At 6 a.m. in the Kimironko neighbourhood, a young baker scrolls through her WhatsApp messages. Overnight, 20 new orders have come in. Payments are neatly recorded in her mobile money app. Her business is organised, profitable, and trusted by her community.

As her business grows, she occasionally hires part-time and casual workers to help with baking and deliveries, creating income opportunities for others in her community.

Her experience reflects a growing generation of Rwandan entrepreneurs who market products and services through social media, or sell fruits and vegetables in their neighbourhoods, manage finances with mobile money, keep records, and maintain reliable customer networks.

In practice, many of these enterprises operate with the discipline and structure associated with formal businesses. Yet officially, many remain classified as informal, highlighting a broader challenge in Rwanda’s labour market.

In Rwanda, a formal business is generally understood as one that is registered with the Rwanda Development Board and complies with tax obligations through the Rwanda Revenue Authority. These systems are essential for accountability, regulation, and access to broader economic opportunities. Yet officially, only about 12 per cent of businesses in Rwanda are classified as formal.

Recognising the importance of youth entrepreneurship for Rwanda’s development, the Government of Rwanda, in partnership with the European Union and the United Nations Development Programme (UNDP Rwanda), launched the AGUKA programme to unlock the potential of youth-led enterprises.

The programme provides integrated support across the full entrepreneurial journey, from ideation and incubation to post-incubation, through training, mentorship, access to finance, market linkages, and support for business formalisation.

Evidence from the AGUKA tracer study, conducted in 2025 among nearly 2,000 entrepreneurs supported between 2022 and 2025, illustrates both the challenge and the progress achieved.

While many supported youth enterprises still operate outside the formal system, 31.9 per cent of AGUKA-supported businesses are formally registered. This is nearly three times higher than the national average, suggesting that targeted support, mentoring, and business development services significantly increase the likelihood that young entrepreneurs transition into formal economic activity.

The data also reveals something deeper. Many entrepreneurs are already running organised businesses long before completing the administrative registration process. They manage payments, maintain customer networks, keep transaction records, and create jobs, some full-time and others part-time.

Registration remains essential for taxation, regulation, and access to public services, but the findings suggest that informality is not always a reflection of weak business activity. In many cases, it reflects a gap between how young entrepreneurs are already operating and how systems recognise and support the transition into formal enterprise.

The consequences of this gap are particularly significant for women. The tracer study shows that 79 per cent of women-led enterprises remain informal compared to 59 per cent of those led by men. While formalisation requirements are necessary for a healthy business environment, women entrepreneurs often face additional structural barriers in reaching this stage, including limited access to finance and constraints that make it harder to engage with formal markets and financial systems.

Addressing these barriers is therefore essential to ensure that more women-led enterprises can fully realise their potential.

Yet focusing only on these classifications risks overlooking an important reality: a powerful story of entrepreneurial progress. The tracer study shows that young entrepreneurs supported by AGUKA, both formal and informal, are transforming livelihoods and communities. Their businesses are expanding, creating jobs and generating ripple effects across sectors such as transport, food services, retail and construction. These enterprises strengthen local economies in ways that may not always appear in official categories but are felt every day by the communities they serve.

Take the story of Coco (not her real name), who participated in YouthConnekt 2024 and built an education and entertainment enterprise that uses creative performances to raise awareness and deliver social messages. Today, the business employs 14 people and works with institutions and organisations to deliver educational content through media.

The enterprise operates regularly, manages staff and generates income, yet completing full business registration has taken longer than expected due to administrative requirements and operational constraints.

Many stories like Coco’s in the tracer study challenge a common assumption: that informality necessarily means insignificance. In reality, many youth-led enterprises already create jobs, organise supply chains, and generate economic value even before they complete formal registration.

This challenge is not unique to Rwanda. Across Africa, youth entrepreneurship is expanding rapidly as young people create their own economic opportunities. The Africa Youth Employment Outlook 2026 highlights major shifts in the continent’s labour markets, including the growing role of small enterprises and service-sector activity in absorbing young workers.

Yet the report also points to a critical challenge: much of this employment remains informal or unstable, raising important questions about the quality and sustainability of youth jobs across the continent.

At the same time, the AGUKA tracer study highlights an important nuance. While youth enterprises are generating employment, many of the jobs created remain casual, short-term, or part-time. Between 2022 and 2025, youth-led businesses supported through AGUKA generated more than 128,000 jobs, yet only a small share of these positions are classified as permanent employment.

This reflects the early stage of many businesses, but it also raises an important policy question: how can entrepreneurship programmes support not only job creation but also the transition toward more stable, higher-quality employment?

Rwanda, with its strong policy ambition and dynamic entrepreneurial ecosystem, is well-positioned to lead the next phase of innovation in this area. The AGUKA programme itself offers a promising platform to test new approaches that support businesses throughout their growth journey, from early entrepreneurial activity to full formalisation.

This may include simplified registration pathways, stronger mentorship and aftercare services, improved access to affordable finance, and the use of digital tools that help entrepreneurs demonstrate the performance and credibility of their businesses.

Young Rwandans are already building businesses and creating jobs that sustain families and communities. The challenge now is not simply the creation of work, but strengthening the quality, stability, and formalisation of that economic activity.

Supporting young enterprises to grow, formalise, and create more stable employment will be essential to translating Rwanda’s entrepreneurial energy into long-term and inclusive economic transformation.

Diane Ineza is a Programme Support & Strategic Communications Specialist, and Nicolas Schmids is a Programme Analyst with UNDP Rwanda, where they work on youth entrepreneurship and inclusive economic development initiatives, including AGUKA.