Gaps and solutions in the entrepreneurial ecosystem in Rwanda

Rwanda has enjoyed remarkable success over the last decade, which can be evidenced by high economic growth, rapid poverty reduction and, since 2005, reduced income inequality. Between 2001 and 2015 real GDP growth averaged at about 8% per annum. In 2014 it grew by 7 per cent and 6.9 per cent in 2015.

There is an increasing focus on Private sector development in Rwanda; in fact Rwanda has consistently improved its positioning in the World Bank's 'Doing Business' ranking. It was ranked 46th out of 189 countries in the 2015 report and 3rd in Africa.

The private sector remains small, as the great majority of the population is involved in subsistence farming and the informal economy; despite it’s small size, an increased focus on entrepreneurship and SME development has however been promoted to centre stage in recent years.  The Rwandan government has facilitated more business friendly policies, making it easier to open a company and pay taxes while also setting up entrepreneurial courses and spaces such as the Business development centres around the country. While this has tremendously helped the population gain confidence in formalising their businesses, more effort is needed to increase awareness and education on how businesses are managed, and the type of taxes that businesses need to pay.  Essentially there is a need to share more information and make it accessible to the wider public.

Academic institutions have also stepped up their game, over the last 6 years Rwanda has seen an increasing number of academic institutions offering courses tailored to aspiring entrepreneurs. Local universities and international institutions from Kenya and the United States are offering courses in Business administration, accounting and management. It is hoped that the increase in business-orientated courses will improve the entrepreneurial culture in Rwanda, whilst also support the requirement for skills needed to work for business service providers.

In 2015 Ejo partners, a Kigali based consulting company focused on providing tailored solutions to organizations and entrepreneurs who want to grow businesses carried out a survey and round table with their partner BiD Network. It was the aim of this exercise to identify gaps and seek solutions to the obstacles affecting the growth of SMEs in Rwanda. The round table gathered Small and Medium Enterprises (SMEs), Business Development Service (BDS) providers, banks, government institutions and donors.

Below are some of the findings from the round table

Top Challenges for the growth of SMEs

• Mindset of entrepreneurs (dependency, lack of focus, limited market research)
• Purchasing power of consumers
• Limited access to information regarding market regulations, taxes and market developments.
• Lack of understanding by SMEs of their market, limited studies on consumer trends, market size for goods and services resulting in the creation of products and services that are not appealing to their customers.
• Talent gaps, SMEs find it very difficult to employ and retain skilled staff with professional experience.
• Lack of collaboration between BDS providers who end up offering similar services
• Access to finance, limited range and expensive financial products offered by banks  

Solutions to spur the growth of SMEs in Rwanda

• Improve quality of products and services through improved product design and market research. There is a limited number of BDS providers who actually support SMEs in doing their market and product design.
• Good record keeping of business activities in order to get loans from banks and use it efficiently and effectively.
• Training, mentoring & coaching of entrepreneurs to improve their business acumen
• More networking between entrepreneurs within their industries and across different industries
• Advocacy to decrease interest rates of bank loans
• Role models in business who are willing to share their stories of how they became successful and support to change the entrepreneurial mindset in Rwanda.
• More sector specific advise from BDS providers

From the round table we found it interesting that all participants, including entrepreneurs focused on the need for change in the entrepreneur’s attitude. There was a general consensus that entrepreneurs needed to improve not only their market research so as to provide superior products and services, they also had to improve their production processes and more importantly focus on what their customers valued and how they want to be reached.

The need for improvement also extends to BDS providers in Rwanda, there is an increasing number of providers who focus on idea generation, business plan writing, short trainings and one off grants. Unfortunately there are a limited number of providers who provide long-term support for entrepreneurs, from the idea phase, to product design, to scaling and market building.

To achieve the following we believe that more networking is needed between the different stakeholders. There is also a need to consolidate efforts between the different BDS providers to complement their services. Finally SMEs in Rwanda need to start investing in their companies, in the capacity of their staff and their management tools. SMEs also need to advocate for better market data from the bureau of statistics and from marketing firms.

In other words both BDS providers and entrepreneurs should start asking their customers what they want and need.

Images in this blog are credited to Alex Niragira.

This blog is part of the September 2016 series on Inclusive Business Development Services, in partnership with the Inclusive Business Accelerator. Don’t miss the whole series on support available to inclusive business from practitioners, donors and intermediaries including Afrilabs, DFID, Endeva, EY and many more…