Path to Growth: a framework to improve access to finance for Rwandan SMEs
In Rwanda, access to finance remains a major challenge for many SMEs. To address this, ADA and LuxDev have developed the Path to Growth, a framework within the KIFC project (Kigali International Financial Centre) that goes beyond supporting SMEs on an individual basis. The Path to Growth offers a structured pathway to strengthen the SME’s business models, facilitate their access to appropriate financing solutions and build lasting links between SMEs, enterprise support organisations and financial institutions.
Rwandan SMEs play a key role in job creation, the development of local value chains and economic diversification. Agriculture is central to Rwanda’s economy, representing 25% of GDP and 41% of total employment. Yet many SMEs operating in agriculture, fisheries and aquaculture still struggle to access financing suited to their growth needs.
These difficulties stem from several factors: high collateral requirements, restrictive eligibility criteria, high interest rates, as well as a limited capacity of many SMEs to provide the documentation required by financial institutions, to name a few. In addition, a majority of these SMEs belong to the so-called “missing middle” where there is a lack of financial products tailored to their growth stage and needs, as well as limited access to tailored non-financial support.
A progressive framework
The Path to Growth was developed within the framework of the "Support to the Development of the KIFC" project, funded by the Grand Duchy of Luxembourg and implemented by LuxDev. It aims to address the gap between the potential of businesses and their access to finance.
The approach is based on the idea that access to finance should not be seen as a starting point, but as the outcome of a maturation process. Businesses are supported in structuring their organisation, clarifying their needs, strengthening their management capacities and presenting a stronger case to financiers.
The stages of the pathway:
- Selection and self-assessment
The pathway begins with the identification of SMEs by the Private Sector Federation and the Imanzi Business Institute, the project partners. Selected businesses carry out a self-assessment to identify their needs and level of maturity.
- Capacity building
This capacity building is tailored to the results of the SMEs self-assessment. With the support of the Imanzi Business Institute, they take part in practical training covering key areas such as digital skills, financial management, business development, taxation and leadership, while also structuring their business profile.
- Coaching and business profile improvement
SMEs that meet maturity criteria continue on the pathway with the support of the African Management Institute. This phase deepens the learning gained through training, strengthens management practices and better prepares businesses to present their activities and financing needs to financial institutions.
- Investment readiness
The most advanced SMEs then benefit from individualised support, again provided by the African Management Institute, to formulate their financing requests and prepare them for discussions with financial institutions.
- Connecting with financiers
In the final stage, SMEs are directed towards the most suitable financing solutions through a mapping of available options and connections with selected financial institutions. Access to finance depends on the maturity of the business, the quality of its application, the fit with available products, and the decision of the financiers.
An ecosystem approach
The Path to Growth is grounded in a Market Systems Development approach, which aims to bring about lasting improvements in how a market functions by strengthening the roles, capacities and relationships of its various actors.
The aim of the project is therefore not only to support SMEs individually, but also to strengthen the wider ecosystem around them: enterprise support organisations, financial institutions, technical partners, semi-governmental or governmental bodies and business networks. This helps improve SME investment readiness, facilitates dialogue with financiers, and strengthens locally available support services.
Key features of the programme include a funding map and a community of practice of participating SMEs.
The funding map matches SMEs' financing needs with the most appropriate funding solutions available in the market.
The community of practice allows them to continue exchanging after training and coaching sessions, share experiences, identify business synergies and stay connected with other actors in the ecosystem.
First results
188 SMEs have benefited from entrepreneurial capacity building, with particular attention given to businesses in the agricultural sector and to women-owned or women-led enterprises, which account for 50% of the supported SMEs. To date, 12 SMEs have secured financing for a total amount of 812 million Rwandan francs (471 580 euros).
Towards a sustainable model
Designed as an evolving access-to-finance and market systems development framework, Path to Growth is intended to be progressively adopted by local actors and expanded to other economic sectors. By structuring SME support and strengthening collaboration between stakeholders, it lays the foundations for more sustainable and inclusive financial ecosystems and market growth.