The Government of Rwanda has initiated various programs to enhance the country’s exports and address trade deficit. The Second Economic Development and Poverty Reduction Strategy (EDPRS 2), for instance, targets an annual exports growth of 28%.
Rwanda has for a long time been experiencing a trade deficit resulting from low exports and increased imports from the East African region and other countries in Asia, Middle East and Europe.
To address the trade deficit, the Government of Rwanda through the Ministry of Trade and Industry (MINICOM) this year embarked on a campaign to promote production and consumption of locally produced goods. The campaign dubbed “Made in Rwanda” has received support from private sector players and has created awareness among the general population about the socio-economic benefits of consuming locally produced goods and growing Rwanda’s export sector.
In November last year MINICOM signed a Memorandum of Understanding with the Development Bank of Rwanda (BRD) to manage the Export Growth Facility (EGF). The facility is aimed at facilitating export oriented SMEs to access finance through interest subsidies, grants and credit insurance facilities to boost their exports. According to Benjamin Manzi, Head of Export financing, lack of sufficient and affordable financing is one among main challenges faced by exporters.
Therefore, EGF was established to address this challenge in order to boost export trade. So far BRD has started the operationalization of the fund to support SMEs through direct lending while also working on the on-lending model for other financial institutions to get involved.
In addition to managing the fund, BRD has so far financed export related businesses to the tune of up to Rwf.18 billion to support exports and recapturing of domestic markets.
EGF has three windows through which it aims to reduce the cost for financing, required collateral and facilitate and enhance exporters to enter and grow in the export market.
Investment Catalyst Fund
Through this fund exporters have the benefit of accessing subsidized loans of up to 10% interest rate per annum. Before the fund was launched, BRD financed loans at prevailing market interest rates that were an average of the current market rates.
To increase accessibility of affordable finance, Manzi says that BRD plans to partner with local financing institutions.
Matching Grant Fund
Contrary to the investment catalyst fund is focused at encouraging investment in the export sector, the matching grant fund aims at supporting investors who are already in the market to penetrate new markets. By offering financing of up to 50% of the total cost of penetrating new markets, BRD helps exporters to finance business plan development, standardization and certification such as ISO and organic certifications. The grant fund however does not go beyond USD. 100,000 per individual beneficiary.
To enhance credit worthiness of exporters, mainly on a short term basis, BRD provides guarantees of between (65-70) per cent of the value of goods on consignment. Through the guarantee facility, in collaboration with MINICOM, BRD provides credit insurance guarantee to facilitate exporters between the pre-shipment and post shipment period. This significantly solves the collateral gap burden for financial institutions and encourages them to lend to exporters who need to make urgent deliveries.
In addition to the Export Growth Facility, BRD finances recapturing of domestic market projects to develop local industries, improve trade balances and provides soft capital to address reliability and effectiveness of supply of raw materials to local industries through the growth anchor initiative. BRD intends to expand the initiative and explore how the Bank can assess the needs of local industries through cooperatives in partnership with National Agricultural Export Board (NAEB) and Rwanda Cooperative Agency (RCA) to support them better.
The Technical Assistance Program cuts across all the Bank’s initiatives in the export sector as it aims to build capacity of stakeholders in the export supply chain. A key target for the program is SMEs with high potential to enter and compete in new markets. BRD is also involved in projects’ restructuring whereby it hires experts and enhances awareness of exporters’ products through organizing export exhibitions.