Rwanda’s economic success over the last decade is widely recognized. The country is one of Africa’s fastest growing economies with growth averaging more than 7 percent every year since 2000. Sustained economic growth rates have seen gross domestic product (GDP) per capita increase from US$242 in 2000 to US$787 by 2018.
Rwanda is one of the few countries that has managed fast economic growth, robust reduction in poverty, and a narrowing of inequality. The impressive economic growth has been accompanied by substantial improvements in living standards, life expectancy, literacy, primary school enrollment, and spending on healthcare. The country’s focus on homegrown policies and initiatives has contributed to significant improvement in access to services and human development indicators. Poverty was reduced to 38.2 percent (from 44.9 percent in 2011 and 39.1 percent in 2014) and extreme poverty to 16.0 percent (from 24.1 percent in 2011 and 16.3 percent in 2014) in 2017. Inequality measured by the Gini coefficient fell from 52 in 2005 to 42.9 in 2017. Nevertheless, Rwanda remains one of the poorest countries in the world and incidence of poverty remains particularly high in rural areas.
The gains in poverty reduction are linked to the country’s impressive progress on stability, good governance and a strong drive for results. Rwanda ranks well in global governance metrics, including government effectiveness, regulatory quality and control of corruption, measured by the Worldwide Governance Indicators rankings and competitiveness in the World Economic Forum’s Global Competitiveness Index. The strength of institutions represents an important comparative advantage over most other countries in the region.
Rwanda is pursuing an ambitious agenda to reach upper middle-income status by 2035 and high-income status by 2050. The country’s Vision 2050 aims to deliver an improved standard of living for all Rwandans. This entails providing food security and nutrition, universal access to water and sanitation, affordable and reliable energy, and universal access to quality health care, education, financial services and housing. To reach middle- and high-income goals, the government has identified a modern agriculture and food sector, increased trade and regional integration, well-managed urbanization and major investments in human capital as its main priorities. Building on the successful economic performance of the last two decades, the government is pursuing the challenging second-generation economic reforms of export diversification, structural transformation, regional integration and financial sector deepening.
Rwanda’s Vision 2050 and National Strategy for Transformation 1 recognize the pivotal role that the private sector will need to play to achieve these goals. Job-creating growth is central to attaining the vision, which requires a shift from the public investment approach to private sector-led development in a country where private investments remain limited.
While Rwanda is peaceful and stable today, forced displacement has long been a feature of the region. Instability in neighboring Democratic Republic of Congo (DRC) and Burundi has seen many people flee to Rwanda, with the country hosting 149,602 refugees and asylum seekers (48 percent from Burundi and 52 percent from DRC). Burundian refugees arrived in 2015, but some of the Congolese have been in the country since the 1990s (See Box 1). Additional inflows cannot be ruled out given ongoing sociopolitical tensions in the region.
The legal and protection environment in Rwanda is conducive for a development response to forced displacement. The country is a signatory to the 1951 Refugee Convention. The 2014 Law Relating to Refugees complies with international law. The World Bank, in consultation with the United Nations High Commissioner for Refugees (UNHCR), has confirmed that Rwanda’s refugee protection framework is adequate.
Around 90 percent of refugees in Rwanda live in the six camps spread across the country, with the remainder living in urban locations, mostly Kigali. The camps are jointly managed by the Ministry in Charge of Emergency Management (MINEMA) and UNHCR. Refugee demography is balanced, with 51 percent being female and 49 percent male. Women and children make up 76 percent of the refugee population, while 3 percent are elderly.
Rwanda has responded progressively to the challenge of forced displacement. The country has elected to roll-out the Comprehensive Refugee Response Framework (CRRF), a new global instrument built around the notion of including refugees in communities from the very beginning of displacement – that they can become self-reliant and active contributors to local economies when they gain access to education and labor markets. The decision to become a CRRF roll-out country flowed naturally from four commitments the government made at the 2016 New York Leaders’ Summit, as follows: (i) public launch of a joint government-UNHCR livelihood strategy, with a focus on graduating camp-based refugees out of assistance programs and increasing formal access to work opportunities;(ii) ensure 100 percent of refugees are in possession of refugee identity cards; (iii) 100 percent of refugee students in secondary school and 50 percent in primary schools will be integrated into national education systems; and (iv) ensure that 100 percent of urban refugees will have the opportunity to buy into the national health insurance system. In March 2019, the government completed a Strategic Plan for Refugee Inclusion 2019-2024 (SP), which spells out how the four commitments will be implemented.
Rwanda has also offered a pathway to naturalization to refugees, though few have taken up the offer due to either a desire to eventually return home or hopes of third country resettlement. Accordingly, a sizable refugee population is likely to remain in Rwanda for the foreseeable future. This necessitates the adoption of long-term development solutions that will promote self-reliance and autonomy.
Why economic inclusion of refugees and host communities matters
The protracted refugee presence has had mixed impacts at the local level. On one hand, the refugee population can be a burden on a country in which 56 percent of people still live below the international poverty line.8 The establishment of camps has affected food availability and strained basic services in the districts hosting refugees. Some local school populations have increased by more than 300 percent. Several camps have been set up in mountainous areas, leading to soil erosion and run-off into agricultural land. Deforestation has also occurred as refugees gather wood and non-timber forest products for cooking fuel and other purposes. Offsetting the negative effects, refugees have contributed to the local economy in the host districts through labor and trade. A 2015 study on the economic impact of refugees in three camps in Rwanda showed that cash aid generates significant positive income spillovers for host community households and businesses.9 The World Food Program has recently transitioned from food aid to cash transfers in all six camps, which should boost local markets and create market opportunities for refugees and host community members. Further investing in economic inclusion and in local development can help to mitigate the negative impacts of the refugee presence while maximizing the opportunity it also presents.
The government’s livelihood strategy for refugee inclusion is built on a vision that refugees and hosting communities will be able to ‘fulfil their productive potential as self-reliant members of Rwandan society.’ The strategy – which is currently under revision – is built on three pillars. Pillar 1 supports wageearning employment and seeks to: (a) raise awareness of refugees’ right to work; (b) provide technical and vocational skills training; and (c) support job placementservices. Pillar 2 on self-employment supports entrepreneurship and access to finance. Pillar 3 supports advocacy to the government of Rwanda, the general public, the private sector and refugees themselves for refugee self-sufficiency and entrepreneurship. The strategy recognizes that inclusion can help to graduate refugees from unsustainable long-term humanitarian aid while optimizing the contribution they can make to local economic development.
Access to finance is a central element of the government’s approach to economic inclusion.
While Rwanda has done much to improve access to finance to all, more can be done, including for refugees. In 2017, 50 percent of Rwandans held an account at a financial institution, declining to 48 percent for women and 38.7 percent in rural areas. Only 8.1 percent of adults have access to credit nationwide. Umurenge Savings and Credit Co-Operatives (U-SACCOs, referred to as SACCOs in this document) and Microfinance Institutions (MFIs) play an important role in improving financial inclusion. There are 416 SACCOs, one in each administrative sector, covering all of Rwanda’s 30 Districts. From 2008 to 2012, SACCOs increased access to formal financial institutions from 21 to 42 percent.
The government’s strategy for economic inclusion of refugees aims to ensure that 90 percent of refugees use banking services. A 2018 study concluded that this objective was feasible, noting that ‘refugees in Rwanda have enough income to be strong potential customers for financial sector providers.’ Access to financial services will support the economic integration of refugees and contribute to the Rwandan economy. As noted above, all camps are moving away from food vouchers to cash transfers. This influx of liquidity will benefit from being hosted at a financial institution. Currently, refugees have access to some financial products thanks to non-governmental organizations (NGOs), including village savings associations and patient loans deployed through SACCOs. Refugees also access financing from SACCOs thanks to Rwandans who act as guarantors. For access to finance through other institutions, refugees face obstacles related to a lack of regulatory clarity regarding the acceptability of proof-of registration documents for the purposes of customer identification and verification.
Though the presence of Refugees has negatively impacted the environment surrounding the camps, the government recognizes that the socio-economic inclusion of refugees can contribute to economic opportunities for host communities, who live in some of the poorer districts in the country. Poverty in five of the six districts hosting refugees is higher than the national average. Gisagara (which hosts the Mugombwa camp) and Karongi (which hosts the Kiziba camp) are two of the four poorest districts in the country, with poverty levels of 56 and 53 percent respectively. Host communities suffer from the same development constraints as refugees – limited employment opportunities, poor quality education and a dependence on low-income agriculture for livelihood. While relations are generally good between refugees and hosts, providing equitable access to development assistance to refugees and host communities and encouraging joint economic activity will promote continued peaceful co-existence between the two groups.
Socio-economic Inclusion of Refugees and Host Communities Project
The government has requested assistance from the World Bank for the social and economic inclusion of refugees and host communities. In August 2017, the government wrote to the World Bank requesting access to funding under the IDA18 Sub-window for Refugees and Host Communities (RSW). In March 2018 this request was followed by a detailed project proposal. Over the subsequent twelve months, with the support of the World Bank, the proposal was refined to become the US$60 million Socioeconomic Inclusion of Refugees and Host Communities Project (SEIRHCP). The project was approved by the World Bank Board of Directors on April 30, 2019.
The project will contribute to the upcoming shift from a humanitarian to a long-term, government-led developmental response that integrates refugees and host communities. In line with the principles of the CRRF and the Strategic Plan for Refugee Inclusion, project activities will mitigate the negative impact of the refugee presence on the environment and strengthen access to and improve quality of services. The project will also increase livelihood and employment opportunities for refugees and host communities to grow the local economy and build self-reliance.
The project will adopt an area-based approach that supports refugees and host communities in the six districts that host refugee camps. Beneficiaries will be supported through socio-economic infrastructure (schools, health centers, water systems, connective roads and market places); access to finance to promote private sector investment, opportunities for entrepreneurship and wage employment and skills development; and by addressing the degradation of the environment caused by the refugee presence. Investments will be possible in and outside camps, however, consistent with the long-term development approach, there will be a preference to support economic activity and government services outside the camps. Facilitating the involvement of the private sector will be central to the project’s approach to economic inclusion.