Financing Manufacturing in Rwanda

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Linda Calabrese, Phyllis Papadavid and Judith Tyson, June 2017

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Rwanda is one of Africa’s “rising stars”. The country’s economy has seen solid rates of economic growth since the civil conflict in the mid-1990s. Strength in investment flows has followed in the path of this macroeconomic and institutional stability. As this report highlights, a large part of Rwanda’s success has been the result of proactive policies undertaken by the government of Rwanda in facilitating a good domestic investment climate, which have been conducive to strong rates of growth in foreign direct investment (FDI) into the economy.

Despite the country’s successes, though, developments in manufacturing have not been as encouraging: the sector’s share of the economy and exports is still small. The report aims to analyse Rwanda’s financial backdrop, and the composition of its investment flows into manufacturing, with a view to exploring constraints and opportunities in manufacturing.

In analysing financial and economic challenges, this paper concludes that high transport and utility costs, the elevated real effective exchange rate and weakness in bank lending are key challenges to be tackled. Looking ahead, special economic zones should continue to be a focus alongside export-oriented investments; prudential measures could target manufacturing finance and disincentivise overly high levels of real estate lending

 

Photo credit: A’Melody Lee / World Bank (Flickr)