The COVID-19 crisis has highlighted the need to double down on efforts to scale up the deployment of innovative financing approaches that create pathways for poor and vulnerable communities across the globe to cope with existing challenges and new risks posed by the pandemic.

In a rapidly changing development context, UNCDF recommends accelerating transformational change, driven by innovation, risk-taking, digital solutions, small business financing, and partnerships led by local government action.

Rwanda’s Financial Sector Development Strategy prioritizes savings — including informal Village Savings and Loans Associations (VSLA) models—, local investments, and digital financial innovations as key enablers of a transformational uptake and usage of financial services in Rwanda. The strategy harmonizes in ambitions with the National Strategy for Transformation and the Rwanda Payment System Strategy to promote domestic investments and a digital economy which will lift the country to an upper middle income country by 2035 and a high-income country by 2050 as articulated by the Vision 2050 strategy.

With levels of financial inclusion in Rwanda rising up to 93 per cent as indicated by the Finscope 2020 report, Rwanda is shifting its focus from financial services accessibility to improving its population’s financial health and living standards in general. Nevertheless, the 7 per cent financially excluded population of whom the majority are traditionally vulnerable groups such as the poor, those residing in remote rural areas, youth, women, and old people remain a priority for the government of Rwanda.

UNCDF prides itself on being Rwanda’s development partner in the financial sector since 1981. Today, the organization is working to accelerate financial inclusion by connecting Rwanda’s rural population and low-income groups to financial services and digital financial platforms to promote an Inclusive Digital Economy . In 2019, UNCDF partnered with Comic Relief and Jersey Overseas Aid to launch the ‘Expanding Financial Access and Digital and Financial Literacy (REFAD)’ programme with an objective to support a resilient and sustainable local economic development through empowering the demand and supply sides of Rwanda’s financial sector ecosystem.

The REFAD model is an approach that coalesces digital financial education, designing and adopting client-centric financial products, strengthening VSLAs to provide rural and refugee communities with transformational, convenient, and affordable financial services that enable individuals and families to make sound financial choices and increase their households’ incomes.

REFAD not only contributes to Rwanda’s financial inclusion objective of extending financial services to the unbanked and underserved groups, but it also delivers technical assistance and capacity building to the supply side of inclusive financial services in Rwanda. The programme equips UNCDF community-based partners —NGOs, social enterprises, and financial institutions — with the required training and tools to develop, test, and roll out innovative financial products tailored to the needs of low-income people in Rwanda.

Inkomoko, a social enterprise that provides business and entrepreneurship development services and Umutanguha Finance Company (UFC), a microfinance institution that focuses on serving low-income people including refugees and their host communities, are two of the four REFAD programme implementation partners. The institutions have both dispatched their branches and agents in rural and refugee communities across different regions of Rwanda to support low-income people build their financial resilience while increasing the uptake and usage of digital finance by using savings groups as a point of entry.

Inkomoko has, since 2019, formed over 200 saving groups in 4 refugee camps and host communities across Rwanda. Over 3000 members of these groups were trained in designing viable business ideas and managing micro businesses with an overall goal to transform their groups from VSLA to business-oriented groups.

Joanne Mugema coordinates the REFAD project’s activities at Inkomoko. She notes that when the groups started having rules and governing structures in place, they got better at managing their meetings and funds, worked together to come up with business ideas for the group, and they changed their mindset around consuming all their savings like they used to.

“They are now investment-oriented collectives, and we are following up on them with regular advisory services and coaching. Some groups in the programme have benefitted from the capital grants that we offer after they have gone through the training process. We have also helped other groups to connect with Microfinance Institutions (MFIs) which leads them to adopting formal financial services.” Joanne Mugema, REFAD Project Lead, Inkomoko.

Before the pandemic, the trainings were held through in-person meetings but eventually shifted to Interactive Voice Response (IVR) when the COVID-19 pandemic hit and restrictions on gatherings were imposed in March 2020. Members of the savings groups have now received training on utilizing a group saving mobile app, Save, which helps the groups to keep transacting without meeting physically. About 100 savings groups have already joined the digital group saving platform.

Umutanguha Finance Company (UFC) offers digital financial education in addition to providing traditional banking services of savings and credits to refugees and host communities. The REFAD project has enabled the microfinance company to open over 3500 new bank accounts and disburse more than 350 loans to small entrepreneurs in 3 refugee camps and neighbouring communities in one year. In addition, about 1500 UFC clients in the refugee settlements and nearby communities have received financial education that focused on saving, loan management, and digital banking.

Ghislain Cyizihiro who leads the REFAD implementation at UFC emphasizes that client-centric financial products have brought significant social and economic benefits to refugees and host communities. ‘They are now able to access banking services and financial education within their proximities,’ says Cyizihiro. The COVID-19 pandemic, however, has affected some key aspects of the programme including the financial literacy activities.

“Normally, the savings groups need to have at least basic levels of financial education and guidance to ensure they are effective and efficient in terms of how they manage the groups’ resources. With no gatherings allowed during the lockdown, the trainings (financial education) stopped and we found ourselves unable to carry on with disbursing loans because the training is a prerequisite for our clients in refugee camps and host communities to access loan services. However, savings and withdrawals were still operational as our bank agents remained inside and nearby the camps.” Ghislain Cyizihiro, REFAD Project Lead, UFC.

Since mid-May, UFC has been able to resume most of their activities in and around the refugee camps helping micro-entrepreneurs recover from the shocks of COVID-19. They are restructuring loan terms for clients with payment difficulties, providing capital grant and refinancing packages for new and existing savings groups involved in small business activities.

Aside from banking and educational activities, UFC has distributed face masks, hand sanitizers, and paid health insurance for micro and small business owners grouped in VSLAs. The company has also supplied household items such as jerry cans, hoes, and soap to the most vulnerable members of the VSLAs.

Two other organizations, World Relief Rwanda and Equity Bank Rwanda, are also part of the REFAD implementing synergy. They are active in supporting VSLAs and developing tailored digital financial products that meet the needs of low-income people especially women, youth, and rural populations.

In collaboration with all the implementing partners, UNCDF is training community facilitators who will educate rural and refugee communities on utilizing digital tablets loaded with financial education modules as an alternative for physical educational sessions.

“The REFAD project started with an aim of equipping vulnerable and low income people with digital financial education skills to enable them to master their cash management, budget, saving and eventually be able to work with formal financial institutions. With the COVID-19 crisis, the project became a solution to these people as it equipped them with digital skills to navigate this new digital world. The project is also promoting the digitalization of savings groups’ operations to facilitate members’ transactions and ease access to their financial data so financial institutions can give them loans.” Roselyne Uwamahoro, UNCDF Rwanda Programme Coordinator and Financial Inclusion Expert

Between 2019 to 2021, the REFAD programme seeks to reach 15,000 beneficiaries through savings groups and 37,000 beneficiaries through digital and financial literacy trainings to enhance access to and the use of beneficial financial services in Rwanda, with a focus on women, youth, and refugees.

Stay tuned for our next article on this programme and its results in 2021.