To encourage a savings culture in the country, the government has initiated a campaign this week dubbed “Special Savings Week” that will focus on raising awareness in several institutions including banks, insurance companies, micro-finance institutions and ministries.
This is to increase mobilization of savings nationally that will facilitate substantial investment in both public and private sectors to alleviate poverty.
“We want to increase domestic savings up to the level necessary to match the required level of investment,” James Musoni, the Finance Minister told a press briefing on Monday.
Musoni pointed out that alleviating poverty through investment to meet Vision 2020 targets requires maintaining around 8 percent annual growth over the next 12 years.
The Economic Development and Poverty Reduction Strategy (EDPRS) has set a target of achieving a gross national savings of 18 percent of Gross Domestic Product (GDP) to attain a gross national investment target of 30 percent of GDP.
The country’s Gross domestic savings in relation to the GDP ratio has been consistently negative, varying in a range between 1 percent and -3 percent GDP.
However due to net positive transfers, Gross National Savings have increased to approximately 13 percent today.
“We are not very far from our EDPRS savings goal, but we have to keep in mind that relying on external resources is not sustainable and that EDPRS projections are conservative,” Musoni cautioned.
The minister noted that a good ratio of national savings to sustain an economic revolution should be around 25 percent with domestic savings around 20 percent.
According to Musoni, little capacity to save as a result of little income and an anti-savings mentality are major issues hampering savings mobilization in the country.
Central Bank governor Francois Kanimba observed that his institution has stepped up supervision and management of financial institutions to encourage a savings culture.
Citing previous “cumbersome” conditions put in place by banks such as asking for a deposit of between Rwf100,000 – Rwf200,000 to open a bank account and failure of banks to educate the public on the benefits of banking, Kanimba said this had locked out a large portion of population from accessing banking services.
“These practices themselves were very serious obstacles to the people to work with the banks. Until very recently, there were very few Rwandans who were even aware of the benefits of banking,” he said.
He also mentioned that the Central Bank is encouraging banks to open branches all over the country in order to increase access to financial services.
“We are getting more banks expanding their branch network out of the city going close to the people. Some of them have been developing new products to mobilize savings from the population,”
Kanimba also noted that Central Bank is also focusing on micro-finance institutions to address capacity issues which have been affecting their performance.
“It is really impressing how Rwandans are willing to work with financial institutions when they come close to them. By focusing on micro finance institutions, there will be a very big change in the coming future,” he said.