Central bank lobbies for minimum wage

Staff members of Rwanda Revenue Authority at work at their headquarters in Kimihurura. Emmanuel Kwizera. Emmanuel Kwizera.

The lack of an official minimum wage to facilitate workers’ compensation in the event of bodily injuries is affecting the performance of the insurance sector, the central bank has said.

In the process of determining rightful compensation for workers when they are injured at work, courts rely on minimum wage to determine the indemnity to victims. Lack a minimum wage, among other factors, drives speculation, thereby negatively affecting the insurance sector.

The Deputy Governor of the National bank of Rwanda, Monique Nsanzabaganwa, told the Senatorial Standing Committee on Economic Development and Finance last week that the absence of common minimum pay was one of the issues threatening the survival of the industry.

The session was analysing the National Bank of Rwanda’s 2017/2018 financial year report.

“We need guaranteed minimum wage…its absence is killing the insurance sector,” Nsanzabaganwa said.

She added: “Because in case of bodily injuries, there is no formal reference on the basis of which compensation to the victim can be calculated,” she said.

She pointed out that currently courts base on a daily wage of Rwf3,000 to make decisions, which could be misleading.

The situation, she said, could inflict losses to the insurance sector because of unjustified compensations.

“Lack of minimum wage is a problem because it has left a void where judges set compensation amount as they please,” she said.

She concurred with insurers that some people are exploiting this gap, making an urgent call to set the basic wage.

Jean Pierre Majoro, Executive Secretary of Rwanda Insurers’ Association (ASSAR), told The New Times that the fee was Rwf5,00 back in 2012 before gradually increasing to Rwf3,000 currently, pointing out that this is detrimental to the insurance sector performance.

“A study that was carried out by the Ministry of Public Service and Labour showed that a person working in informal sector earns Rwf1,400 [on average]. But, courts are using Rwf3,000 and they might continue to increase this amount,” he said.

He said that minimum salary is needed in order to prevent speculation by judges or lawyers.

“The move would be beneficial for both the claimant and the insurer because there have been delays resulting from disagreements that end up in court over the money that should be given to the former,” Majoro noted.

Rwanda’s insurance sector’s total assets grew by 13 per cent from Rwf399.8 billion in 2017 to Rwf452.5 billion in 2018.

Net premiums contributed to the sector amounted to Rwf116.9 billion in 2018 from Rwf109.1 billion in 2017, representing a 7 per cent increase.

Total claims [paid out] rose by 13 percent from Rwf60.3 billion in 2017 to Rwf68.1 billion in 2018.