PublicDisclosureAuthorized PublicDisclosureAuthorized PublicDisclosureAuthorized PublicDisclosureAuthorized RwandaEconomicUpdate MobilizingDomesticSavingstoBoostthePrivateSectorinRwanda February2024 ©2024.WorldBankGroup ThisworkisaproductofthestaffofTheWorldBankwithexternalcontributions.Thefindings,interpretations,andconclusionsexpressedinthisworkdonotnecessarilyreflecttheviewsofTheWorldBank,itsBoardofExecutiveDirectors,orthegovernmentstheyrepresent. TheWorldBankdoesnotguaranteetheaccuracyofthedataincludedinthiswork.Theboundaries,colors,denominations,andotherinformationshownonanymapinthisworkdonotimplyanyjudgmentonthepartofTheWorldBankGroupconcerningthelegalstatusofanyterritoryortheendorsementoracceptanceofsuchboundaries. RightsandPermissions Thematerialinthisworkissubjecttocopyright.BecauseTheWorldBankGroupencouragesdisseminationofitsknowledge,thisworkmaybereproduced,inwholeorinpart,fornoncommercialpurposesaslongasfullattributiontothisworkisgiven. Anyqueriesonrightsandlicenses,includingsubsidiaryrights,shouldbeaddressedtotheOfficeofthePublisher,TheWorldBank,1818HStreetNW,Washington,DC20433,USA;fax:202-522-2422;e-mail:pubrights@worldbank.org. TABLEOFCONTENTS Acronymsi Acknowledgmentsii Abstractiii ExecutiveSummaryiv PARTI:RECENTECONOMICDEVELOPMENTS1 1.1.Globalandregionaldevelopments2 1.2.Realeconomicactivity2 1.3.Labormarkettrends4 1.4.Inflation,monetarypolicy,andfinancialsectordevelopments5 1.5.Externalsectordevelopments6 1.6.Fiscalsectoranddebtdevelopments7 1.7.Economicoutlookandrisks9 PARTII:MOBILIZINGDOMESTICSAVINGSINRWANDA11 2.1.Thestateofdomesticsavingsmobilization13 2.2.Determinantsofsavingsbehaviorathouseholdlevel15 2.3.Developmentoffinancialsystemandsavings16 2.5.Policyleverstoincreasesavings23 2.6.Conclusion33 References35 Annexes37 LISTOFFIGURES Figure1.1:GDPgrowth,demandcomponents3 Figure1.2:GDPgrowth,supplyside4 Figure1.3:Rwanda’slabourmarket5 Figure1.4:Inflationdevelopments5 Figure1.5:Decompositionofheadlineinflation6 Figure1.6:Creditgrowthremainedstrongin20236 Figure1.7:Rwanda’sprojectedgrowthinthemediumterm9 Figure2.1:GrossdomesticsavingsandgrossnationalsavingsaspercentofGDP13 Figure2.2:Grossdomesticsavings–Rwandaandpeers14 Figure2.3:Numberofbankaccountsandactivemobilemoneyaccounts14 Figure2.4:SavingbehaviorinRwanda15 Figure2.5:EjoHezaparticipation,2018-202217 Figure2.6:Insuranceuptake18 Figure2.7:Retailbondsasapercentofgovernmentsecurities20 Figure2.8:RemittanceinflowsandFDI,2010-202821 Figure2.9:Remittancerecipientsvs.generalpopulation:selectcharacteristicscompared22 Figure2.10:CostofsendingremittancestoAfricancountries23 Figure2.11:Valueofinboundremittances32 LISTOFTABLES Table1.1:Globalandregionaleconomicgrowth2 Table1.2:Employmentbyselectedsectors5 Table1.3:Balanceofpayments,2020–20237 Table1.4:Governmentfinancialoperations,FY2020/21-FY2023/247 Table2.1:Componentsofnationalsavings13 Table2.2:CoverageratiosofpensionschemesacrossselectedEastAfricancountries17 Table2.3:KeyinsurancemetricsinselectAfricancountries19 Table2.4:OperationalrecommendationstofurthercatalyzeEjoHeza26 Table2.5:HighLevelPrinciples(HLPs)topromotedigitalsavings29 LISTOFBOXES Box2.1:Saving-investmentidentity12 Box2.2:Digitalsavingsgroups28 Box2.3:Promotingsavingsthroughremittancesanddiasporaengagement33 BNR/NBR BanqueNationaleduRwanda CGAP ConsultativeGrouptoAssistthePoor CMA CapitalMarketAuthority DFS DigitalFinancialService EAPS EastAfricaPaymentSystem EMDEs EmergingMarketandDevelopingEconomies FDI ForeignDirectIndirect FSP FinancialServiceProvider GDP GrossDomesticProduct GoR GovernmentofRwanda HHI Herfindahl-HirschmanIndex HLP High-LevelPrinciple ICT InformationandCommunicationTechnology IMF InternationalMonetaryFund LMIC Lower-MiddleIncomeCountry MFI MicrofinanceInstitution MINECOFIN MinistryofFinanceandEconomicPlanning MIS ManagementInformationSystem MPFSS MonetaryPolicyandFinancialStabilityStatement MTOs MoneyTransferOperators NPL Non-performingLoan RSE RwandaStockExchange RSSB RwandaSocialSecurityBoard RTB RetailBond SACCO SavingandCreditCooperativeSociety SBIC SmallBusinessInvestmentCompany SDG SustainableDevelopmentGoal SSA Sub-SaharanAfrica VAT ValueAddedTax TheRwandaEconomicUpdate(REU)analyzesrecenteconomicdevelopmentsandprospects,aswellasRwanda’spolicypriorities.TheREUisintendedforawideaudienceofpolicymakers,businessleaders,othermarketparticipants,analystsofRwanda’seconomy,andcivilsociety.ItdrawsondatareportedbytheGovernmentofRwandaandadditionalinformationcollectedbytheWorldBankGroupinitsregulareconomicmonitoringandpolicydialogue. Publishedtwiceayear,eachissuehasaspecialfeaturespotlightingaparticulartopic.The22ndeditionofREUfocusesontheRoleofFinancialSectorinmobilizingDomesticSavingsinRwanda.Thecurrentedition,ledbyCalvinZebazeDjiofackandPeaceAimeeNiyibizi,isacollectiveendeavorandinvolvedstafffromseveralpartsoftheWorldBank.TheteamincludesRosebudBuruku,BriceGakombe,HelydaSarun,ErwinR.TiongsonandMiglePetrauskaite.TheteamisgratefultoPhilipSchuler(LeadEconomist)andFionaElizabethStewartforinvaluableinputso