Banks and insurance companies currently serve only a fraction of the population according to a study’s findings released at Serena Hotel Wednesday.
The survey – FinScope Rwanda 2008 – prepared for the Central Bank by the FinMark Trust, a South African non-profit organization, points out that only 14 percent of the Rwandan population above 18 years of age use banks.
This and other revelations were duly acknowledged by many, including Finance Minister James Musoni, who was the chief guest at the function.
“Access to finance is still a problem that afflicts all developing countries, especially in Africa,” he said, shortly after pointing out that the study undertaking was a clear manifestation that government and development partners recognized both the financial sector’s role in mobilizing savings and its positive impact on economic development.
“I am confident that these results will help all of us to better plan for financial sector development, do the follow-up and the evaluation of the implementation of our plans, said Musoni.
Francois Kanimba, the Central Bank Governor also acknowledged the challenges.
“The assessment highlighted serious weaknesses including a narrow and shallow Rwandan financial sector system, an oligopolistic banking sector, a very low penetration of insurance services as well as undiversified financial products,” he said.
Kanimba stressed that this prompted the formulation of a Financial Sector Development Programme (FSDP) to develop a stable and sound financial sector, deep and broad enough and capable of efficiently mobilizing and allocating resources to address the development needs of the economy.
The results also indicate that of those who banked at formal institutions, a third do not hold any additional informal or other formal financial products.
The study also revealed that despite most financial institutions being concentrated in Kigali City, only 21 percent of the city dwellers use the banking system.
FinMark Trust CEO, Mark Napier underscored the one of the most common challenges was financial literacy. He specified that many people, over 60 percent, would want to know more about how to spend money wisely, how credit works and how to keep their money safe, all of which would help then better understand financial matters. Napier, however, stressed that despite some of the “gloomy statistics”, the overall sentiment is fairly positive.
“Over a quarter of the adult population has no formal education but positively 97 percent are involved in decision making about their own money and women are more likely to make financial decisions alone than men.”
He added that although it takes people over an hour to get to the bank, this is no worse than the time it takes to access healthcare and secondary schooling.
Despite a generally very poor insurance product usage, Mutuelle de Santé is outstanding and 80 percent of Rwandan adults have medical insurance.
“This reflects further progress on the already impressive extension of community health cover. This is particularly impressive considering the burden that malaria places on families every year,” said Napier.
FinScope is a national household survey of financial services needs and usage amongst consumers aimed at establishing benchmarks and highlighting opportunities for product innovation.
It covers all areas of financial interest that examine quality of life, poverty, attitudes towards and usage of financial products, as well as measuring levels of financial literacy.