Rwanda-Finscope-2024-Report_compressed.pdf

Rwanda FinScope Survey 2024
63 Satisfaction Most customers report high levels of satisfaction with the services they receive and can count on bank staff for financial advice. The least performing indicator is the measure of “reasonable cost”. Compared to bank users, mobile money users feel that charges or fees are not afford- able. The perceived high service cost is a key concern that affects the frequency of service usage observed while assessing the frequency of service use. Figure 64: Statements around banking products and service 89 87 78 76 66 62 51 9 12 18 22 32 34 46 2 4 2 1 2 4 3 Can count on your bank staff for financial advice Satisfied with your bank's customer support Fees and charges are transparent or easy to understand You would choose the same account Too much downtime on the bank platform Bank fees or charges are affordable Mobile money fees or charges are affordable TRUE FALSE Do not know Rwanda FinScope Survey 2024
64 5 IMPACT OF FINANCIAL SERVICES Rwanda FinScope Survey 2024 65 The impact of financial services is far reaching influencing various aspects of our lives from personal finance to economic growth and social progress. Measuring the impact of financial services and products involves assessing effectiveness in achieving desired outcomes, such as improved livehoods. 5.1 Financial Needs The ‘needs’-based framework looks at how or why people are using financial services and where the formal sector might be falling short. These ‘needs’ are based on an understanding that people use financial services to meet a specific need. The reasons for which people use financial services can be categorized into one of four universal financial needs: 1. Transfer of value – to make payment or transfer. 2. Liquidity – to meet expenses within an income cycle. 3. Resilience – to meet large expenses that have resulted from a financial shock. 4. Meeting goals – to achieve events/life objectives that require financing. Is the financial sector meeting the needs of Rwandans? How do individuals meet their finan- cial needs? Transfer of value – Almost all adults have a need to make payments or transfer value from one person to another. 94% (7.7million) of adults have either bought airtime, paid bills, sent money etc. in the past 12 months. A higher proportion of adults are meeting this need both via digital channels as well as cash. Digital channels are driven largely by use of mobile money. This shows that the financial sector is meeting the transfer of value needs of individuals as they have the financial products they can use to transact. Liquidity – the indicator looks at the ability to meet expenses within an income cycle. 88% (7.1 million) reported having ran out of money for food or important things in the past 12 months (50% experienced challenges with liquidity more often). Only a few individuals managed to get financial help from financial institutions when they had liquidity issues. Financial institutions tend to prioritise funding productive needs hence the reliance on informal credit is high. Resilience – Almost three quarters (72%/5.8million) of the adults experienced a risky event that had a financial impact. This indicator looks at the ability to deal with shocks. Few Rwandan adults who experienced risky events used financial mechanisms or prod- ucts such as insurance, formal savings or balance in account to cope with risk. Majority of them resorted to non-financial coping means such doing nothing or cutting down expenses or receiving assistance from family or friends. This may indicate that the role of the financial sector on risk transfer is limited. Main hindrance to uptake of insurance products remains affordability/product suitability and lack of awareness. Meeting goal – About 81% (6.6million) of Rwandan adults reported that they have some life objectives or goals that they are trying to meet. These include mainly devel- opmental goals such as investing in their business, buying/building a house, buying a land, education among others. More than 3.7 million adults or 46% would like to invest or start their businesses (this includes the 19% who would like to buy agriculture and business inputs and assets). Around 39% (3.2million) have housing or land financing need. Above a third of adults who have a financial goal are not meeting this need and are doing nothing about it. Another 29% used financial products (but only 7% used for- mal credit). Importantly, the financial sector has the opportunity to grow its relevance on meeting people’s needs, especially through credit. (e.g., mortgage finance, educa- tion finance, MSME in productive sectors financing, etc.).

Rwanda FinScope Survey 2024 66 Table 8: Universal Financial Needs TRANSFER OF VALUE 94% LIQUIDITY 89% How they met the transfer of value need (device used) How they managed liquidity need (device used) Cash 92% Formal savings 3% Digital – Bank 13% Informal savings 3% Digital – MM 70% Formal credit 1% Informal credit/got goods on credit 27% Family/friends credit 7% Sold assets/livestock 4% Did nothing/cut down expenses 44% Other 11% RESILIENCE TO FINANCIAL SHOCK 72% MEETING GOAL 81% Main Risk experienced: Main goals: Serious illness 33% Start/expand business 27% Price increase 26% Buy/build house 22% Theft 12% Buy inputs/assets/agriculture activities 19% Death 8% Buy land 18% Household member lost 6% Education 8% income/job 2% Other 6% How they coped with risk (device used) How they met their goal (device used) Savings 8% Formal savings 2% Insurance 1% Informal savings 9% Formal credit 1% Formal credit 7% Informal credit/got goods on credit 19% Informal credit/got goods on credit 11% Family/friends credit 7% Family/friends credit 1% Sold assets/livestock 12% Sold assets/livestock 6% Did nothing/cut down expenses 41% Worked more/got additional jobs 26% Did nothing/cut down expenses 35% 5.2 Financial health The advocacy for increased financial inclusion assumes that access to financial products and services has a positive impact on individuals’ financial well-being. However, policy efforts have primarily focused on expanding financial inclusion without fully considering its effect on consumers’ financial health. FinScope Rwanda 2020 introduced the concept of financial health to highlight how financial services can contribute to individuals’ and societies’ well-be- ing. By using a financial health indicator, policymakers can design financial policies that priori- tize consumers’ financial health, as well as inform social protection and employment policies. Additionally, this indicator can serve as a tool to evaluate progress in these areas.

Rwanda FinScope Survey 2024 67 5.2.1 Defining financial health index The financial health index provides valuable insights into individuals’ financial conditions. However, to analyze specific segments of the population, such as gender, income groups, and location, a ranking system is necessary. To achieve this, the indices have been grouped into four quartiles. The healthiest individuals, classified as financially healthy, have index val- ues ranging from 75 to 100. Those with index values between 50 and 74 are considered finan- cially coping, while those with values between 25 and 49 are classified as financially vulnera- ble. Individuals with index values less than 25 are considered extremely financially vulnerable. The financial health of consumers is defined as the ability to manage current financial obli- gations smoothly and have confidence in their financial future. This is measured using four key parameters: the ability to manage day-to-day financial transactions, taking advantage of opportunities, resilience against shocks, and having control over one’s financial decisions. By assessing these parameters, the financial health index provides a comprehensive understand- ing of individuals’ financial well-being. 5.2.2 Managing day-to-day finances The “Day-to-Day” dimension measures the ability to manage short-term financial resources effectively, ensuring that income covers expenses and consumption needs. The results show an improvement in day-to-day financial management between 2020 and 2024, with a 0.6 increase in the overall mean (average) score. The Day-to-Day sub-scores reveal: • “Control spend” increased from 1.9 to 2.5, indicating better expense management. • “Means to close liquidity gap” decreased from 3.9 to 3.2, suggesting a slight decline in the ability to bridge financial gaps. Overall, the results suggest progress in managing daily finances, with some areas for im- provement. Table 9: Managing day to day index scores and sub-mean score Dimension 2020 2024 Day-to-day (overall) 5.9 6.5 Control spend 1.9 2.5 Means to close liquidity gap 3.9 3.2 Income cycle

3 5.2.3 Taking advantage of opportunities The “Opportunities” dimension assesses consumers’ ability to take advantage of economic growth opportunities, including saving and investing, setting goals, and achieving financial objectives. The results show a decline in the overall opportunity score, from 6.5 in 2020 to 5.5 in 2024 (Table 10). The opportunities sub-scores reveal: • “Save and investment” remained relatively stable, increasing slightly from 2.1 to 2.2. • “Achieving goals” decreased significantly from 2.3 to 1.2, indicating a decline in progress towards financial objectives. The decline in the overall opportunity score suggests that consumers are struggling to achieve their financial goals and make progress toward economic growth. It has been noted that majority of Rwandans who have life goals are not using financial products/services to meet goals.

Rwanda FinScope Survey 2024 68 Table 10: Opportunity index scores and sub-mean score Index 2020 2024 Opportunities (overall) 6.5 5.5 Saving and Investment 2.1 2.2 Achieving goals 2.3 1.2 Accomplished financial goals 3.1 5.2.4 Resilience towards shocks Financial health includes being prepared for unexpected setbacks or emergencies. The Resil- ience indicator assesses the ability to manage and recover from financial shocks. The index includes the ability to raise emergency funds, the ability to respond to shocks and the recov- ery period. The results (Table 11) show a significant increase in the overall Resilience score from 2.8 in 2020 to 6.4 in 2024. This improvement is consistent with the increase in insurance coverage among Rwandans, with around 1 million adults acquiring insurance products since 2020. The resilience sub-scores reveal: • Ability to raise emergency funds increased from 0.8 to 2.6 • Ability to respond to shocks remained stable at 2.6 This suggests that Rwandans are becoming more financially resilient, with an improved ability to manage and recover from financial emergencies. Table 11: Resilient index scores and sub-mean score Index 2020 2024 Opportunities (overall) 2.8 6.4 Ability and means of raising emergency funds 0.8 2.6 Means of responding to shocks 2.2 2.6 Recovery period

2.6 5.2.5 Control over own financial affairs (Act) The “Act” dimension assesses respondents’ ability to control their finances and make sound financial decisions. The metrics include input in household financial decisions, financial com- mitment management, and debt management. The results (Table 12) show an increase in the overall act score from 10.7 in 2020 to 13.5 in 2024, indicating that more Rwandans are taking control of their financial affairs and making sound financial decisions. The Act sub-scores reveal: • Financial decision-making increased from 3.2 to 3.6 • Financial commitment management remained stable at 3.7 • Debt management decreased slightly from 4.3 to 4.2 This suggests that Rwandans are becoming more financially empowered, with improved de- cision-making and control over their financial commitments, although debt management remains an area for improvement. Table 12: Act index mean scores and sub-means score Index 2020 2024 Act (overall) 10.7 13.5 Financial decision 3.2 3.6 Financial commitment management 3.7 3.7 Debt management 4.3 4.2

Rwanda FinScope Survey 2024
69 5.2.6 Financial health indicator Developing the financial health indicator involves two steps wherein the score is computed by aggregating all the scores and transforming the scores into percentages using the follow- ing steps: Financial Health Score = Manage day-to-day finances + Opportunities (Taking ad- vantage of opportunities) + Resilience +ACT. Financial Health Index = FHS x (100 x FHS) Overall, the financial health of Rwandans is improving, 10% of adults or 1.3 million adults who were financially vulnerable in 2020 are now financially stable (coping or financially healthy). This means more than 2 in 3 adults are in a better situation to balance their income and expenses, take advantage of the economic situation, be resilient and able to make sound financial decisions and have control over their financial affairs. The Financially healthy indi- cator showed the most significant improvement, increasing by 6 percentage points, from 4% in 2020 to 10% in 2024. This means that more adults are now financially stable, able to save, invest, and make informed financial decisions. Overall, these changes indicate a positive trend towards improved financial health among Rwandans, with fewer adults struggling financially and more achieving financial stability. Figure 65 reveals four financial health segments, at the bottom pyramid are the extremely 206K or 3% adults and close to a third or 2.6 million adults classified as financial vulnerable. Around 57% or 4.6 million adults are approaching financial health status as they scored some of the 12 indicators, but there are areas of development. The last segment are the individuals (10% or 780,000) described as financial healthy, they are likely to have scored nearly or all 12 indicators and can balance their income and expenses, taking advantage of the economic situation, resilient and able to make sound financial decisions. Figure 65: Financial health strand (%) Extremely financially vulnerable Financially vulnerable Financially coping Financially healthy 0-24 25-49 50-74 75-100 206K 2.6M 4.6M 778k 3% 31% 57% 10% 7 3 37 31 53 57 4 10 2020 2024 Rwanda FinScope Survey 2024 70 5.3 Summary of the Financial health indicator In summary, financial health indicator is based upon 12 behaviour indicators including con- trol spend, means to close liquidity gap, income cycle, save and investment, achieving goals, accomplished financial goals, ability and means of raising emergency funds, means of re- sponding to shocks, recovery period from shock, financial decision, financial commitment management and debt management. Figure 66 demonstrate scores allocation, defined seg- ments, and size of the segments. Figure 66: Summary of the Financial indicator construction and segments 2024 2020 0 10 24 0 30 40 49 50 60 74 75 80 90 100 Health scores between 0-24 represent individuals that are extremely vulnerable and unable to survive and manage their financial situations Health scores between 25-49 represent individuals that are financially vulnerable and unable to survive and manage their financial situations. These individuals scored few of the 12 indicators Health scores between 50-74 represent individuals that are considered financially coping. These individuals scored some of the 12 indicators, but have room for improvement Health scores between 75-100 represent individuals that are considered to be very healthy to balance their income and expenses, take advantage of the economic situation, resilient and able to make sound financial decisions. These individuals scored nearly all or all of the 12 indicators Extremely financially vulnerable Financially vulnerable Financially coping Financially healthy 5.4 Welfare and Vulnerability indicators Linking the aspect of financial health indicators with welfare indicators is crucial as this speaks directly to the SDGs with a clear overlap on how financial services assist in this regard. Com- pared to 2020, there have been notable improvements. A lower proportion of adults/house- holds have reported having gone without cash income and making plans for daily needs, skipping meals because of lack of money. The effects of the pandemic are also visible as households faced more challenges in 2020 than in 2024 due to restrictions in movement and generating income. Although 2024 has some improvements, we still have households facing difficulties. This leaves a considerable proportion of households susceptible to poverty, and lack of basic amenities, and education. Poverty-alleviating interventions to improve standards of living are of paramount importance. Figure 67: Welfare and Vulnerability indicators (%) 54 63 34 37 40 44 61 83 Gone without cash income and had to make a plan for daily needs Had to skip a meal because of lack of money for food Gone without treatment or medicine because of lack of money Not been able to send kids to school because of lack of transport/ fees/uniforms 2024 2020