Rwanda’s economic development: stock market or Kigali market?

We have been working with a wide range of financial institutions in Rwanda, from the Minister of Finance, the commercial banks, some private equity firms, all the way down to savings co-operatives in the poorest villages.

The experience has been a crash course in development economics for me. How does an economy shattered by genocide rebuild from scratch? How can external donors like Britain, with our 10 year commitment to give £500 million to Rwanda, help to establish a vibrant private sector that eventually weans the country off overseas aid?

Using external consultants, Rwanda has documented a clear economic vision set out as Vision 2020. This includes “Universal Education for All” and improved access to health care.

In this document is a wish list of major infrastructure projects – a new railway line, a massive new international airport and the application of e-government principles.

Recently, a fully staffed Capital Markets Advisory Council set up a stock market, now listing four illiquid local currency bonds. For a country with dirt tracks in rural areas and no electricity or sanitation in rural villages, ambitious infrastructure plans like these will barely impact the rural poor. At the other extreme, we visited microfinance branches in small towns and villages, and in the Kigali markets. These were mainly run by charities. They were teaching some of the very poorest about saving and borrowing. We saw some real examples of small business successes, like furniture making and a sports bar. These sorts of micro initiatives, combined with the establishment of legal title to land, rural insurance and better rural infrastructure should be given emphasis in the country’s poverty reduction strategy. They offer the path to building small and medium sized businesses and an entrepreneurial middle class.

As the largest bilateral donor to Rwanda, I hope Britain can take a leading role in influencing this emphasis.