RECENTLY, the World Export Development Forum (WEDF) was held in Kigali. This was a remarkable achievement for Rwanda, as the first African country to host this event. Rwanda’s economic stability and commendable year-on-year growth has undoubtedly been a catalyst to attracting high-level meetings of this nature. During the discussions at WEDF, a common narrative was reiterated in respect to SME development. This was the need to improve access to finance, and spread financial inclusion to a bigger portion of the eligible population. As a banker, this is a statement I hear often, from the public, financial services consumers, developmental organizations, and regulators. Often, access to finance is expressed, rather carelessly as the main solution to SME development and on a larger scale economic development. There is merit to this, but it is important to understand the process and existing challenges to overall financial inclusion because SME finance is a sub set of access to finance as a whole. Inclusive financial systems play a vital role in reducing poverty, through savings growth, provision of credit to invest in social welfare, build assets and start businesses, which generally improves livelihoods and guards against economic vulnerabilities. Through an aggressive expansion agenda pushed by both the public and private sector, the proportion of Rwandans financially excluded reduced from 52% in 2008 to 28% in 2012. The focus has now shifted to the final mile; to get 90% of the adult population banked by 2020. The need for financial services among Rwandans exists and financial institutions are available to provide it, so the question is, why aren’t these two aspects pairing at a faster rate? According to the World Bank, the most frequently cited reason for not having an account is perceived lack of funds. So people assume their contribution will not be sufficient and would much rather keep the little they make under a mattress than bank it. Other frequently mentioned barriers include; lack of required documentation, proximity, high fees and general maintenance costs. Most of these challenges are being addressed with the introduction of low cost financial products, growing branch networks and technology based solutions such as ATMs and mobile banking. Some institutions have gone as far as scrapping fees to cater to low-income consumers which is commendable, but still only a step in the right direction. Beyond access to financial services, we need to increase the usage of financial services – something that is so often overlooked. Here financial literacy and information dissemination must take centre stage. Already, there are ongoing financial literacy campaigns throughout the country to sensitize the public on financial products and services but ultimately, the onus should be with consumers, who stand to benefit from financial growth. When it comes to SMEs and microenterprises, financial education is crucial to address the need for viable and sustainable business plans that present attractive prepositions for Banks. SME capacity development will provide entrepreneurs with the right tools to create profitable business ideas. Banks cannot afford to sacrifice the quality of loans to achieve volumes, because poor repayment habits, often characterized by inept business planning, will inevitably become a burden on the consumer, the financial institution and the economy as a whole. SME’s must prioritize financial sensitization. Entrepreneurs should take advantage of existing programs through developmental organizations that offer on the job training, general business information and evaluate credit applications in liaison with financial Institutions. In developed markets, meaningful financial inclusion is measured by constant usage. Therefore, it is critical to view access to finance as the first step albeit its significance. Concerted efforts must be put in by all stakeholders to pursue repetitive usage, for SMEs information dissemination and capacity building programs will provide strong foundations to leverage finance, which build sustainable businesses. Only then shall we be able to harness their potential to create jobs, reduce poverty and increase economic growth. The Writer is Manager, Communication and External Affairs, GTBank (Rwanda) Ltd albert.akimanzi@gtbank.com
