Rwanda-Finscope-2024-Report_compressed.pdf

Rwanda FinScope Survey 2024 49 Almost three-quarters (72%) of the 16-17-year-olds have not borrowed and those who have credit relied mainly on informal mechanisms. This is not surprising considering that the ma- jority of them still depend on their parents/guidance for income and they may not qualify for formal credit. Reliance on exclusively informal credit is high among women and rural populace. Raising awareness about the advantages of borrowing formally among women and adults residing in rural areas is of paramount importance. Informal lenders may use unfair means to get the money back, in addition to charging higher interest rates and it is important to educate these groups in this regard. Table 2: Credit strand by demographic characteristics

Bank (%) Other formal (%) Informal (%) Family and friends (%) Not borrowing (%) Credit population 10 14 34 4 37 Gender Male 13 16 30 4 37 Female 8 12 39 4 38 Area Urban 19 16 24 4 38 Rural 6 14 39 4 37 Age groups 16-17 5 5 12 6 72 18-24 6 9 31 5 49 25-30 10 16 40 4 31 31-45 14 18 38 4 27 46-60 13 18 38 3 29 61+ 8 12 32 4 45 When acquiring credit, individuals have different objectives to meet. Some may borrow for productive reasons, while others do so for consumption reasons. Figure 43 shows that about half of the credit active consumers borrowed for productive reasons, such as investing in business (9%) and education (10%), as well as for buying farming equipment/livestock (11%), and building/improving dwelling (12% each). It is encouraging to see the productive credit skew towards the self-employed population. Figure 43: Reasons for borrowing (%) 2 7 9 9 10 11 11 12 16 Paying off other debt Medical expenses Emergencies(excl. medical) Business/Investments Education/School fees Farming expenses Farming equipment/livestock Building/Improving dwelling Living expenses

Rwanda FinScope Survey 2024
50 Figure 44 shows that 42% of the self-employed obtained credit mainly to expand their busi- nesses. Other credit drivers include buying land/building/improving dwelling (10%). Figure 44: Reasons for borrowing (%) – business owners 5 5 6 8 10 11 11 42 Medical expenses Emergencies (excl. medical) Education/school fees Living expenses Other Building/improving dwelling Buying livestock/farming equipment Business/investments About 4% of Rwandan adults (324,000) report having refused a loan by formal institutions in the past six months. Of those who have been denied loans by the formal institutions, lack of security or collateral, and no down payment were the most common reasons for refusal. Figure 45: Loan refusals and reasons behind loan refusals (%) 4 7 22 15 28 11 Refused loan at formal institution past 6 months - 2024 Refused loan at formal institution

• 2020 Did not have security/collateral
• bank Did not have down payment - bank Did not have down payment - mobile money Income/saving was too low - mobile money The survey explored credit-related obstacles in Figure 46. About one-third of adults who did not borrow money did not have a credit need, followed by doubts about their ability to repay the loan receiving 24% mentions. Approximately 22% of adults who did not borrow did not meet the requirements for borrowing, either because they had no collateral to secure a loan or lacked documentation. Given the current economic hardships that most Rwandan adults and households are experiencing, there is a need to educate borrowers on safe credit usage. Therefore, it is important to promote financial literacy for responsible borrowing. Rwanda FinScope Survey 2024
  51 Figure 46: Barriers to borrowing (%) 1 2 4 5 19 24 30 Interest charged on borrowed money is too high Previously defaulted Do not meet the requirements Do not belive in borrowing money Do not have security or collateral Worried about being able to pay back the money Did not need to borrow money 3.7 Insurance and risk management The design of the Rwandan financial sector is in accordance with international standards, which structure or group the insurance and pension sector under non-bank financial institu- tions, regulated by the National Bank of Rwanda. This section will, therefore, look at both the insurance and pension sectors in Rwanda. In the day-to-day lives of individuals, unexpected events occur and are likely to affect families differently. These unforeseen events/risks impose a significant amount of strain on individuals and households, especially when they are not covered by insurance. To mitigate or reduce the impact of these events, insurance provides protection against a variety of hazards, includ- ing accidents, diseases, natural disasters, and property loss. Insurance is a risk management tool primarily used to offset any costs that would be incurred because of the occurrence of an unplanned event. For this survey, insurance was categorised into formal (policies supplied by licensed insurance companies) and informal (village burial and welfare groups). This survey explored the common household financial risks and their coping strategies. Al- most three in four adults (72% or 5.8 million) in Rwanda experienced a major risk/event in the past 12 months before the FinScope 2024 survey. The greatest risk experienced among the households was facing a serious illness or health problems among family members (33%). Of those who had a risk event that affected their finances, one in four (25%) reported price increases/recession among other risks (mainly food prices). Rwanda FinScope Survey 2024
  52 Figure 47: Main risks experienced (%) Experienced risk event Serious illness of a household member Price increases Death of a relative/family member Theft of agriculture crop/livestock Member of household lost job/income Theft of household property Failure of business Disability due to accident/illness Agriculture crop/livestock destroyed by flood 2 2 4 4 6 7 8 25 33 72 Individuals have different coping strategies. Of those adults who experienced a major event, the main coping mechanisms were cutting down on expenses/doing nothing (37%) and bor- rowing money (27%), especially from informal savings groups. Figure 48 also reveals that some adults had to sell something to get money (12%), while only a small proportion (1%) of these adults claimed on their insurance policies. The fact that many of the households had to do nothing or cut down on expenses, reflects the economic hardships that families may be facing. There is an opportunity for micro-insurance providers to continue offering low-cost, tailored products that may help cope with setbacks. Figure 48: Main coping strategies (%) Did nothing/cut down expenses Borrowed money Sold something Savings Donations Claimed insurance 37 27 12 8 2 1 Insurance uptake: The insurance industry consists of insurers, including private non-life insurers, private life insurers, and public medical insurers. The insurance sub-sector operates a network of branches countrywide: agents, brokers, and loss adjusters. There has been an upsurge in the number of adults having insurance products/insured by someone, from 17% or 1.2 million in 2020 to 27% or 2.2 million in 2024. Figure 49: Insurance uptake (%) Insured Not insured 2024 2020 73 83 27 17 Rwanda FinScope Survey 2024 53 Drivers: The insurance uptake in Rwanda is driven largely by general insurance, life insur- ance, medical insurance and microinsurance. With regard to microinsurance, the National Agriculture Insurance Scheme (Tekana Urishingiwe Muhinzi Mworozi) has played an import- ant role in driving the huge uptake of insurance over the last four years. Barriers: The main barriers to uptake are the reluctance to acknowledge the possibility of risks (48%) and lack of product knowledge (37%, i.e., 17% have never heard about it, 12% do not know about insurance, 8% do not know how it works). Raising awareness of the benefits of insurance products and offering low-cost tailored products will be crucial to Rwandans. Figure 50: Barriers to insurance (%) 49 17 12 8 8 2 1 Have never heard about it Do not know much about insurance Do not know how it works Do not trust them Do not want to pay out Protect self in other ways Do not want to think of any shock happening to him 3.8 Mutuelle de Santé Mutuelle de Santé is part of the Government of Rwanda’s social protection system that was introduced in 1999 to enable members to access healthcare through all public and private non-profit health centres in Rwanda. The aim is also to reduce the financial burden of health- care, particularly for the poorer sectors of society. Membership is voluntary and open to all Rwandan residents for a modest annual payment.The Mutuelle de Santé system is primarily coordinated at the district and sector levels. FinScope 2024 findings reveal that 82% (6.7 million) of adults are covered by Mutuelle de Santé, down from 88% (6.2 million) in 2020. 3.9 Pension fund sector The pension sub-sector, on the other hand, is comprised of one mandatory public pension scheme, the Rwanda Social Security Board (RSSB), and private pension schemes managed by insurance companies, or in-house by employers. There has been a substantial increase in the number of adults who contribute to pension schemes. The number of contributors grew from 7% (500,000) adults to 25% (2,1 million) in 2024. This shows the impact of the new ini- tiative, Ejo Heza Long Term Saving Scheme. Figure 51: Pension fund strand (%) Contribute to pension fund Do not have pension fund 2024 2020 7 25 93 75 Further analysis shows that the pension sub-sector is largely dominated by the uptake of Ejo-heza from 1% in 2020 to 21% in 2024. Ejo-heza long term savings/pension scheme seems to speak to diverse livelihood segments.

Rwanda FinScope Survey 2024 54 Table 3: Drivers of retirement uptake DRIVERS 2024 (%) 2020 (%) Ejo heza 21 1 Other private pension 3 4 Provident fund 2 1 3.10 Retirement plan: Planning for retirement is an important aspect and should be en- couraged. About 15% of adult Rwandans have old age savings while 16% contribute to pen- sion funds. Slightly above half of those with retirement packages are happy with them. Figure 52: Old age savings and retirement 16 58 76 15 82 84 2 1 Contribute to pension fund Happy with retirement package Understand pension benefits Have old age savings Yes No Do not know 3.11 Climate change related risks If not properly prepared, climate change may undo the progress made in financial inclusion. The survey also sought to assess the effects of climate change among Rwandans. The survey results indicate that more than two-thirds of Rwandans (69% or 5.6 million) have experienced a climate change related event. Most of the Rwandans were affected by heavy rains and floods (56% or 4.6 million) followed by pest infestation (27% or 2.2 million) and drought (25% or 2 million). These events negatively impact household livelihoods, especially those relying on farming activities, and lead to shortages of food causing increased prices. Only a few have policies to cover them for these eventualities, further harming them in recovering quickly from these events. Figure 53: Experienced climate-related events (%) 69 56 27 25 21 18 14 1 Experienced climate related event Heavy rains and floods Pest infestation Drought/water scarcity Storm Erosion Extreme heat/ heatwaves Bush burning While we cannot prevent climate-related events from happening, financial inclusion is a tool that can help Rwandans, including those experiencing poverty to build resilience to climate shocks. However, the data, shows that only 30% or 2.45 million of those who experienced cli- mate change related risks have put up measures to mitigate impact on financial, again giving us opportunities to investigate policy reforms and financial products to assist in these chal- lenges. Rwandans were further asked what financial products or coping solutions they would use to address future climate change relates shocks. The majority answered (33%) mentioned waiting for government support and 18% said they would deplete their savings (Figure 54).

Rwanda FinScope Survey 2024 55 Figure 54: Potential financial product to take up for protection against climate related shock (%) 33 18 13 10 7 7 6 6 5 3 2 1 1 1 Seek government assistance Use own savings from informal groups Work for additional income Cut down on expenses Sell livestock to get money Borrow money from friends or family Ask for donations Sell my assets/something I own to get money Borrow money from other sources Borrow money from bank Use own savings from formal institutions such as a bank I will cross the bridge when it happens Borrow money from employer Claim from an insurance policy 3.12 Covid-19 impact The survey also sought to assess how COVID-19 had affected Rwandans. Two-thirds of Rwandans’ livelihoods (66% or 5.4 million) were negatively affected by the Covid pandemic – 42% indicated that their income or revenue was reduced, 34% could not operate, and 29% stopped working for some time. This is not surprising due to lockdown restrictions that were put in place to prevent the spread of COVID-19 hence people could not operate as usual. On the other hand, 1% of the adults reported that their income or revenue increased and a further 26% cited that income remained the same. Figure 55: Covid-19 effects on livelihoods/income (%)

23 26 29 34 42 1 1 Income/revenue reduced Could not operate due to restrictions Stopped working for some time Same as before/ nothing changed I got retrenched Income/ revenue increased Company’s benefits such as pension fund, medical aid, etc. were reduced or stopped The survey also looked at the use of financial products and services during the Covid-19 pandemic. Of those individuals who reported having started or used more financial products and services, most of them used mobile money. About 23% of Rwandan adults mentioned having started using Mobile money (9%) whilst others used more (13%) because of Covid-19. The behavior of using online banking platforms or using card tapping did not change much amongst Rwandans.