The government is targeting to increase national savings ratio to 20 per cent of the country’s gross domestic product (GDP) in the next three years. Currently, Rwanda’s savings stand at 10.2 per cent of GDP and, yet the country seeks to transform to a middle-income economy by 2020.

This would trigger investment of 30 per cent of GDP, the Minister for Finance and Economic Planning, Amb Claver Gatete, said while launching the 2017 Savings Week on October 24. However, the question is how these ambitious goals can be fulfilled given the current low savings culture among the Rwandan population.

According to Eric Rwigamba, the director general for financial sector development at the Ministry of Finance and Economic Planning, there is need for continuous awareness campaigns to educate Rwandans of all ages the importance of saving and how to save. The official said the biggest barrier to savings mobilisation is the perception held by many people that only those that earn a lot of money are ones supposed to save.

"This is very wrong because a person and country with low levels of savings can never grow. Rwandans should know that if we do not save, we cannot invest and hence cannot create jobs which hinder wealth accumulation,” Rwigamba said.

He added that banks use customer deposits to fund the private sector and support development initiatives.

"Therefore, if the bank deposits are minimal this will make loans very expensive, leading to complaints about high interest rate,” he said in an interview with Business Times. Low customer deposits also affect the financial institutions’ ability to lend to the private sector.

That’s why it is essential that the country bolsters its savings to reduce reliance on foreign money lenders that usually charge high rates. Rwigamba urged all Rwandans, regardless of financial status, to prioritise saving, saying "money cannot be enough and there is particular time to save”.

"For instance, if a corporate worker saves Rwf100,000 every month they will be able to buy an omnibus of about Rwf5 million within five years. You can then use the vehicle to widen their income streams besides creating employment opportunities for other people,” he explained.

Interventions to spur domestic savings

Rwigamba revealed that the government has approved a scheme on long-term savings, which will "help farmers, motorcyclists and other informal sector players” to save and be able to finance their development initiatives like building commercial or residential houses or buying vehicles.

Andre Gashugi, the Rwanda National Investment Trust (RNIT) chief executive officer, said there is urgent need to change the mentality that saving is only for the rich.

"Saving is a culture where you have to pay yourself first before catering for other expenditures like rent, school fees and food.”

He also encourages people to embrace recordkeeping and budgeting,saying this enables one to plan their expenditure and savings against what they earn in a given period, say a week (for informal sector) or month (salaried workers).

He said people who receive salaries through the bank can authorise the institution to deduct a certain amount of money every month and deposit it on a dedicated savings account, adding that one must be "persistent and disciplined as you save”.

"You should also use systematic investment plan so that the money is used to earn more cash and bolster your financial standing,” he said.

People can invest in financial instruments like Iterambera Fund that’s managed by RNIT.

The official said it is also important that all government and private sector players create synergies to support the government’s savings mobilisation drive, arguing that this will help bring on board more savers and increase bank deposits and hence funds to fund investment and development projects.

"If we can raise money internally, there would be a lot of benefits for the country in the long-run… people will be able to get loans at lower rates and invest which will in turn create more jobs and value in the economy,” he added.

He called on all government and private sector institutions, local governments, microfinance institutions, and schools to be the proponents of embracing savings culture, encouraging employees to save. Teachers are instrumental in guiding students to understand the importance of saving and encouraging them to join savings clubs at their respective schools.

SACCOs promoting savings

Gashugi said the financial education programme through SACCOs targeting clients and staff of Umurenge SACCOs is also important and should be strengthened in order to bring in more savers and help the country reach the targeted 20 per cent of national savings level.

He added that though the target is ambitious, it is achievable if synergies are created by public and private sector stakeholders to drive the initiative. Government recognises the importance of savings groups and supports initiatives that promote saving among Rwandans.

Members of savings groups were 925,000 as at December 31, 2016 with Rwf16.4 billion worth of savings.

Working formula

Kenneth Agutamba, the Bank of Kigali communication chief, said people do not save because "most of us don’t plan for savings”.

We think that you only save the balance after you have spent on everything else, which mentality needs to change. Corporates, for instance, can plan for savings as one of the monthly financial obligations just like rent, water or electricity bills.

"We are already facing those problems, including expensive loans because we do not have adequate deposits given the fact that few people save and, yet the deposits available are for short-term and cannot sustain long-term lending. As a result, banks have to borrow from abroad to lend at home, which comes with forex related costs and other overheads that ultimately push interest rates high,” Agutamba said.

He is optimistic that the current national momentum on savings mobilisation will help strengthen the savings culture and boost bank deposits enabling financial institutions to fund big development projects without resorting to international lenders.

Saving, investment options

Celestin Rwabukumba, the Rwanda Stock Exchange (RSE) chief executive, said Rwandans should take advantage of the financial market and invest in shares and bonds. He added that the capital market is a safe investment vehicle for those that target to save and invest for the future.

"When you invest in shares or bonds, you are lending your money to that company or the government so it can grow in the future and you will get an interest,” he told Rwamagana District officials on Thursday during an awareness campaign on capital market opportunities.