Synergies of ICT improvements and MSME financing in Rwanda

Micro-, Small and Medium Enterprises (MSME1) play an important role in the economic growth of a country (for instance see Beck et al.), often employing a large part of the population. Despite this, they face greater challenges in comparison, in terms of access to finance. Due to difficulties in obtaining credit-worthiness information financial institutions tend to avoid them. This, however, impedes their growth potential, and the economic growth of the country, as a result.

New information/communication technology (NICT) can help to facilitate easier access to information on credit-worthiness (e.g. for Venture Capital or loans). This article examines the potential synergies of NICTS and MSME financing and their possibilities in Rwanda.

MSME environment in Rwanda

Like most African countries, MSMEs play a crucial role in the Rwandan economy. According to the Ministry of Trade and Industry MSMEs employed 84% of the population. They made up 99.9% of all Rwandan firms in 2011. The majority are in Retail Trade, Accommodation, and Food Processing (African Development Bank Group). The average MSME is 11 years younger than the majority of MSMEs in most Sub-Saharan countries, yet fewer firms are owned by foreign or state proprietors. Real annual sales growth is one of the highest in the entire region with almost 20% (World Bank Group).

Although around 93% of MSMEs have a savings account, only 6% of investments are financed by banks. In the World Banks Enterprise Survey, a third of all business owners saw access to finance as the biggest obstacle (World Bank Group). Around 70% of MSMEs neither have a business plan nor project their future cash flows, whilst the major sources of financing are retained earnings or trade credit (African Development Bank Group).

Since a business plan, audited books and projected cash flows are partial requirements to be officially incorporated, the majority of MSMEs in Rwanda are not incorporated. Consequentially, MSMEs cannot sue or formally be sued. This inhibits their access to formal finance. The Rwandan government is aware of the MSME financing problem.

Several programs have been introduced in order to mitigate the limitation.

  • One example was the introduction of a nationwide credit reporting company by the National Bank of Rwanda in 2009 aiming to lessen the amount of information asymmetries in the credit market (Van Klyton and Rutabayiro-Ngoga).
  • Another approach was the Financial Sector Development Program II of 2011 targeting an increased lending on a village level with the help of Savings and Credit Cooperatives (SACCOs) (Andrews et al.).

Despite improvements, in the end of 2017 there was still a 1.4 billion USD MSME funding gap between credit demand and credit supply (International Finance Corporation).

NICT infrastructure and spillovers onto MSMEs

In 2015, the Rwandan government enacted the National Information and Communication Infrastructure Program (NICI) in order to improve IT knowledge and increase ICT usage in all sectors.

In 2014, mobile phone penetration was already at almost 70% (Uwamariya et al.).

As of June 2020, 62 % of Rwandans have either mobile phone or fixed internet access (Rwanda Utilities Regulatory Authority).

With numbers of internet usage rising the country is aiming to reach 80% of retail payments done online by 2024 from 27% in 2017. Along increasing internet usage and increased IT training, innovative Fintechs are getting on the block especially in the payment and the lending sector.

The Fintechs

More than half are Rwandan headquartered companies, while the others are spread across Africa, Europe and the US (UN Capital Development Fund). One of such Fintech supporting MSMEs is kountable, an US-based trade-credit company providing short-term funding for MSMEs in Rwanda from global investors. In order to obtain data on firm activities and risk behaviour of entrepreneurs, the company makes lending decisions based on social media connections, mobile phone communication and contracts out of which a risk score is calculated (Van Klyton and Rutabayiro-Ngoga).

Similar companies such as Jumo offer micro loans to MSMEs excluded from the traditional financial system. They rely on SMS or social media to obtain a credit score. There is also a long list of similar core fintechs focusing on lending and financing for instance waka waka, mobisol or azuri to name a few (UN Capital Development Fund).

The use of alternative data sources and innovative credit score systems makes it easier for MSMEs to obtain loans. As a result, collateral, previously required in order to obtain traditional banking loans, is either lower or not required. With limited formal documentation on many MSMEs such NICT algorithms help to facilitate easier borrowing and lending.

Are NICT the remedy for MSME financing?

Generally, it seems that banks perceive MSMEs as potential clients (African Development Bank Group), but the absence of proper documentation, information and information sharing systems make it difficult for banks to assess potential default risks. But with higher internet accessibility and a rising culture of fintech start-ups, especially since 2015, it is now possible to assemble information on MSMEs behaviour.

With the assessment of mobile payments, cash conversion cycle checks of the MSME or internal credit score from social media usage (currently used by some fintechs) as methods of generating credit information through NICTs, there are spillover benefits into financing, which may not immediately be evident. For instance, the area of networking.

Networking appears to be an important contributor to MSME growth in Rwanda (Mugwaneza and Brunninge). Due to higher mobile phone penetration, networking possibilities is inevitable, and can help the MSMEs to grow faster.

After the company reaches a particular annual revenue it is easier for the company to obtain formal bank credit. This holds as the collateral for credit relative to revenue is now smaller than before or that the banks prefer larger enterprises as default risk is hedged by higher revenues.

NICTs not facilitatet MSME financing but they also provide networking opportunities.

A prospect into Rwandan MSME financing

Given the rise of Fintechs; the focus on MSME financing using new innovative credit assessment methods; the agenda of the Rwandan government to increase financial inclusion, reform the MSME financing approach and increase NICT development; it seems that Rwanda might be slowly closing the MSME funding gap.

We had been addressing financial issues, so far. But, what other challenges exist at the macro-level? Difficulties with gathering market information outside of their immediate business environment, regulatory compliance costs or limited resources in human capacity building (Rwandan Ministry of Trade and Industry).

The growing dependence on digital technologies during the Covid-19 pandemic is at a disadvantage to MSMEs that previously did not invest in NICTs. Overall, however, access to finance in Rwanda looks good.

1 The definition of MSMEs in this paper follows the Rwandan Ministry definition stating 1-3 employees equals Micro-, 4-30 Small-, 31-100 Medium Enterprise (Rwandan Ministry of Trade and Industry).


• African Development Bank Group. Leveraging Capital Markets For Small and Medium Enterprise Financing Rwanda. 2013.

• Andrews, A. Michael, et al. Rwanda : Financial Sector Development Program II. 2012.

• Beck, Thorsten, et al. “SMEs, Growth, and Poverty: Cross-Country Evidence.” Journal of Economic Growth, vol. 10, no. 3, 2005, pp. 199–229.

• International Finance Corporation. MSME Finance Gap Database. 2017,

• Mugwaneza, Olivier, and Olof Brunninge. “Business Networks and Small and Medium Enterprise Growth in Rwanda.” Rwandan Economy at the Crossroads of Development, 2020, pp. 115–37.


• Rwandan Ministry of Trade and Industry. Rwandan Ministry of Trade and Industry, Small and Medium Enterprises ( SMEs ) Development Policy. no. June, 2010,

• UN Capital Development Fund. The Fintech Landscape in Rwanda. no. November, 2019.

• Uwamariya, Marthe, et al. “ICT for Economic Development in Rwanda : Fostering E-Commerce Adoption in Tourism SMEs.” Proceedings of SIG GlobDev Eighth Annual Workshop, Fort Worth, Texas, USA, December 13, 2015, 2015.

• Van Klyton, A., and Said Rutabayiro-Ngoga. “SME Finance and the Construction of Value in Rwanda.” Journal of Small Business and Enterprise Development, 2018.

• World Bank Group. “Enterprise Surveys.” Enterprise Surveys, 2020, doi:10.1596/32087.


Robert is a European graduate student in Applied Development Economics with a focus on MSME growth in developing countries. In his research he focuses specifically on financial innovation and the synergies it creates with respect to climate challenges.

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