In Rwanda, most people understand the value of saving (kwizigamira). But when it comes to borrowing, many are understandably cautious. And with good reason: taking on debt can either move you forward or set you back, depending on how and why you borrow. ALSO READ: Why teaching children financial responsibility is essential According to the 2024 FinScope survey, only about 24 percent of Rwandan adults use formal credit from banks, SACCOs, or microfinance institutions. The majority of borrowers still rely on informal sources such as friends, family, or community savings and loan groups (ibimina). ALSO READ: Formal financial inclusion in Rwanda grew 39% in 2020-2024 That’s not a sign of weakness; it reflects how deeply Rwanda’s culture of trust and cooperation runs. But it also shows that many people borrow only when absolutely necessary, often for emergencies or short-term needs. So, when does borrowing make sense, and when doesn’t it? Read on to discover when borrowing can help you build a stronger financial future, and when it might lead to unnecessary stress or setbacks. When borrowing can be a smart move Borrowing isn’t automatically good or bad; it depends on your purpose. Used wisely, a loan can be a tool for progress, helping you expand your income, gain new skills, or handle emergencies without derailing your goals. The key is understanding the difference between debt that builds you up and debt that weighs you down. Here are a few times when you may be making smart money moves when borrowing: To build or grow a business A productive loan (inguzanyo y’iterambere) can help you earn more income. Whether you’re buying farming equipment, stocking a shop, or starting a moto-taxi business, credit can act as capital — the fuel that turns effort into income. Just make sure the business has a clear plan and potential profit greater than the loan’s total cost (interest and fees). Borrowing to make money is very different from borrowing because you don’t have money. For education or skills training Investing in knowledge pays lifelong returns. A small loan for school fees, a vocational programme, or a digital-skills course can raise your future income potential. Some Savings and Credit Cooperatives (SACCOs) and microfinance institutions (MFIs) now offer “education loans” with lower interest rates. For productive assets, not perishable ones Borrowing to buy a cow, sewing machine, or smartphone used for business can be wise since these assets generate or support income. But borrowing for fast-disappearing items such as clothes, parties, or airtime usually leaves you poorer, not richer. To handle true emergencies Medical care, family crises, or home repairs sometimes require immediate funds. If savings aren’t enough, a small, short-term loan from a reliable SACCO may be justified. Still, your first line of defense should always be your emergency fund, not new debt. A personal reality check Most Rwandans would probably be shocked to know how much Americans borrow. The typical U.S. family is up to their eyeballs in debt; credit cards, car loans, student loans, and mortgages. I know because I used to be one of them. More than 20 years ago, I had $100,000 in credit card debt alone. You read that right: six figures’ worth of credit card bills, or roughly Rwf150,000,000. And that didn’t even include my old student loans (about $40,000), my car loan (around $30,000), or my home mortgage at the time (over $250,000). Thankfully, I paid off all that consumer debt years ago. I still have a mortgage, but it’s affordable and at a very low interest rate. When I learned to manage credit and debt wisely, I became far more disciplined, and I discovered an important truth: just because you can borrow doesn’t mean you should. Since then, I’ve been more selective and intentional about accepting loans or credit offers. And that’s a lesson worth remembering anywhere in the world, including Rwanda. Borrowing can be a helpful strategy, but if not managed wisely, it can quickly turn into a trap that costs far more than it’s worth. When borrowing becomes a trap Borrowing may feel like a quick solution when money is tight. But if the loan doesn’t serve a clear, productive purpose, it can easily become a burden. Understanding the red flags before you take on debt can help you avoid unnecessary financial stress. Here are the times you should steer clear of loans, or at least think twice about them: Borrowing for consumption Taking loans for lifestyle expenses — phones, celebrations, or travel — provides short-term satisfaction but long-term stress. You pay more later for something that’s already gone. High-interest or unclear loans Some digital lenders or informal lenders charge rates so high, they double or triple your balance. If you can’t easily calculate what the loan will cost, or if fees aren’t explained clearly, walk away. Borrowing without a repayment plan Before signing, ask: what is my plan for repayment? If your income is irregular, consider seasonal or flexible-payment products offered by SACCOs and MFIs rather than monthly fixed-rate loans. Guaranteeing other people’s loans In Rwanda, it’s common for relatives or friends to co-sign each other’s debts. But if they fail to pay, you become responsible. Only guarantee loans you can personally afford to repay. How to borrow wisely Calculate the true cost. Include all interest, fees, insurance, and penalties. Borrow small, repay fast. The shorter the term, the less interest you pay. Use SACCOs or regulated MFIs whenever possible. They’re designed to support local development and usually have fairer rates. Keep your savings active. Borrowing and saving can happen at the same time. In fact, SACCO members who save regularly often qualify for better loan terms. Protect your reputation. In Rwanda, your name is tied to your credit history. Paying on time builds trust and future opportunity. A cultural reminder Traditional wisdom says: “Inguzanyo itunganye itera imbere; inguzanyo mbi irasenya.” A good loan builds you up; a bad one breaks you down. Borrowing isn’t inherently good or bad; it’s simply a tool. Like a hoe in the field, it can cultivate a harvest or cause harm depending on how it’s used. When you borrow thoughtfully; for growth, education, or income, you strengthen your household and contribute to Rwanda’s broader economic vision of self-reliance (kwigira). But when borrowing fills gaps that discipline or patience could solve, it erodes progress. So before taking your next loan, pause and ask: will this debt help me build something that lasts? If the answer is yes, borrow with purpose. If not, keep saving: your future self will thank you. Lynnette Khalfani-Cox is a personal finance expert, speaker, and author of 16 books including the New York Times bestseller “Zero Debt.” She and her husband Earl Cox are expanding their financial education firm in Rwanda to support financial literacy, entrepreneurship, and economic empowerment. Money Moves is a bi-weekly column providing practical wisdom and strategies for building wealth and financial security in Rwanda’s evolving economy.
