Experts believe that lack of access to finance by entrepreneurs is not a major bottleneck that cripples start up businesses.
Andrais Noerlem Christensen, Chief Executive Officer of Educate - a Danish non-profit organisation - said most entrepreneurs fail to concentrate on the basics of how to run start-up businesses and instead rush at looking for loans.
This, he says, makes it hard for financial Institutions to finance entrepreneurs with poor business practices
"There is no bank that will finance your business because you have written a good business plan, you must first start something that can prove your business can be profitable," Christensen told Business Times in an exclusive interview in Kigali.
He noted that there is a general thinking among local entrepreneurs that financial institutions will avail money to any entrepreneur who approaches them. This is due to poor mindset, he says.
The revelations come at a time when most entrepreneurs in the country are blaming financial institutions for failure to be flexible when it comes to financing start-ups.
"In fact it is not about access to finance, it about attitude of entrepreneurs," Jean Philbert Nsengimana, the Minister for Youth and ICT explains
The Minister says that failure to understand what to do and work hard is the main challenge that is hindering the youths and entrepreneurs to start up their businesses as opposed to access to finance.
"We must understand as youth that we cannot think of getting a loan to start a business, you need to first demonstrate that you can run that project successfully- anything short of that is a speculation," he notes
The Minister adds that that the only way to succeed in entrepreneurship is to aim at starting small and growing big, which he says creates confidence in financial Institutions to extend credit to entrepreneurial projects.
Benjamin Cox, country Director Babson-Rwanda, is optimistic that through networking and motivating young entrepreneurs on how to start business on their own will help push entrepreneurship.
" We need to provide valuable mentorship opportunities to support the move from ideation to launch and to engage leaders in public and private sector and civil societies in conversations to improve overall entrepreneurship ecosystem," he says.
Experts say that most start up businesses do not survive their first year due entrepreneur's thinking of accessing finance from Financial Institutions which makes them put their operational costs and expenses more higher than they can finance themselves.
Moreover, poor savings culture also contributes to Financial Institutions reluctance to lend to entrepreneurs projects as they are always considered unsecure since it is hard to track financial integrity of the entrepreneurs.
"Ability to save and financial discipline are important for Financial Institutions to trust new customers before they give them loans, and most of these entrepreneurs don't have these," Rita Ngarambe, Executive Secretary of Association of Microfinance Institutions of Rwanda-AMIR said
Most financial Institutions find themselves in a tight loop to extend credit to business ideas by entrepreneurs without financial ability to save with Institutions.
"When you are saving with an Institution, it is easier for them to have trust in your capacity to manage repaying back the loan and Institutions need more savings to have enough liquidity," she adds
Government has stepped up campaigns to promote the savings culture which has resulted into an increase in number of banked populations with fin scope report 2012 indicating that 3.2 million adults( approx. 72 per cent of total population) have access to financial services.