Focus Media (Kigali)
Sam Ruburika
4 November 2009
opinion
For the first time, Rwanda has joined the celebration of World Savings Day. With the rate of saving still low, it was an occasion to sensitize people on the benefits of putting their money in the bank.
The day, established by the United Nations in 1989 and celebrated on October 31, aims at sensitizing people on the importance of saving. In this respect, the government launched a "special saving week" to raise awareness in financial institutions, insurance companies, ministries as well as the general public on the importance of saving.
The government has for a long time been encouraging the culture of saving through an internal savings mobilization strategy that includes facilities such as the capital market advisory council, pension schemes, health insurance, microfinance institutions (MFI's), grassroots saving and credit schemes (Umurenge SACCOS), collective investment schemes and decentralization of bank services to the people. Despite all these efforts, the number of people using these services is still very low.
The reasons for this are both historical and cultural. Before 1994, there existed only three commercial banks: Bank of Kigali (BK), Banque Commercial du Rwanda (BCR) and the former Banque Continentale Africaine (BACAR), known today as FINA Bank. Those were set up specifically for external trade purposes and for that reason located within Kigali and other major towns across the country.
At the time, people saw banks as being useful for the rich, and they kept their meager earnings in a convenient hiding place at home.
That situation does not seem to have changed much: for example, today only 8% of the country's population saves. Further evidence is that there is a huge amount of money in circulation, which shows that people prefer to keep their money under their mattress rather than depositing it at the bank.
The "mattress deposits" coupled with the liquidity crunch and the general economic slowdown has made banks register losses in the first quarter, and the situation could continue to haunt some of them in the second one.
Francois Kanimba, the governor of National Bank of Rwanda, indicates that when people do not save, the country's growth is affected. He points out that for Rwanda to keep up its growth rate, it must invest at least 25% of its total annual revenue. Yet last year less than 10% was invested, which Kanimba attributes to poor savings.
Scaring people away
Whereas banks are fundamental in increasing savings by providing enticing packages, in the past they have rather been an impediment. For example, banks never took their services to the people nor did they educate the public on the importance of saving. As a result, most people continued saving in the way they were used to, all the more so since banks scared people away by asking for a minimum deposit of between Frw 100,000 and 200,000 to open an account.
In recent times, however, there has been some improvement. Just five years ago, there were 150,000 bank accounts in six commercial banks, which today has increased to 1.2 million (50% of them at Banque Populaire).
However, the problem does not lie only with the banks; a change of mentality is also required. Francois Kanimba rejects suggestions that some people simply earn too little to save. "Everyone can save, whatever their income; it is a question of behavior and culture," he says.
And it seems that that idea is gradually sinking in, especially in rural areas. "People in the rural area are slowly starting to understand the benefits of saving, even though most of them are low-income earners," Kanimba points out.
To show that change is possible, the governor points at South East Asian countries whose economies in the sixties were in a worse shape than those of some of African countries; but with change of policies, they increased their savings which later contributed 30% to 40% of their GDP. "This is an example that Rwanda should emulate," Kanimba says.
Lawson Naibo, the chief operations officer at Bank of Kigali, stresses that the capacity to get loans is limited if there are no substantial savings. "If deposits in mattresses can be brought to the banks, it would reduce credit interest rates, avail money for lending and hence improve the social economic development of the people."
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