KIGALI: The government is setting up an export credit and insurance facility aimed at improving Rwanda’s trade competitiveness in the international markets. Our target of increasing exports by 28% year on year as per EDPRS2 is not being achieved the way we want and it is up to us to actually understand what can be done to grow our exports to the level that we want,” Emmanuel Hategeka the Permanent Secretary, Ministry of Trade and Industry said last week. Export financing has been identified as one of the key issues that limit growth of export companies in Rwanda.
According to Rajesh Aggarwal, Chief Trade Facilitation and Policy for Business (TFPB), Rwanda has a lot of potential to diversify its exports, get into new areas, value add to the exports and get into new markets. “The scheme is extremely important for any exports to be increased. It has been used the world over by countries to enhance their exports,” Aggarwal said.
“The issuance of export credit insurance/guarantee is important for trade finance, reducing credit risks and allowing exporters to offer open account terms in competitive markets. It is a mechanism of trade financing that is of crucial importance in the current environment of high systematic risk,” Hategeka said.
The PS was addressing different stakeholders, the media at a consultative meeting held to discuss the report released on institution capacity building for export credit and insurance to enhance trade and competitiveness in Rwanda.
“Export credit guarantee is expected to address the challenges that the exporters in Rwanda face in financing their business, providing insurance to exporters, for export contracts and protecting them through a range of services to mitigate risks such as country risk, importer/buyer risk, Letter of Credit opening bank risk, among others and this is what is being done by EXIM Bank in phase 1 of this assignment,” Hategeka said
Last year the ministry of trade and industry made a request to the Geneva-based International Trade Centre (ITC) to actually advice Rwanda on how it can deal with the issues facing its exporters particularly the export finance component.
“ITC together with the Indian EXIM Bank have developed this report/product a few months after which is quite a great milestone for Rwanda,” Hategeka said. He said, “ITC through EXIM Bank India is supporting Rwanda to actually assess the institutional capacity for export credits and insurance”.
Rwanda’s export base is at 1500 exporters, mostly small scale exporters with over 100 companies sending abroad over $1million per year, a 5% of the total number of exporters. Rwanda’s large exporters happen to be in the traditional sector exporting coffee, tea and minerals.
‘”The other challenges that Rwandan exporters still face include access to technology, knowledge of standards and certification, and being able to access the foreign markets,” he said.
With reference to export finance in the country, the national export strategy points out a significant financing gap which has emerged as a major challenge. For delivering export growth, the NES stresses the need for access to finance for funding investment in expanding output for exports, adjusting production practices to meet technical standards in export markets and funding pre and post – shipment activities. The strategy also lays out customizing export finance solutions to exporters.
“This is South- South cooperation. South-South trade and investment as we call it. We will not be working with small farmers but we can work with the exporters to group the small farmers therefore we can work with farmers’ groups,” Govind Venuprasad, Coordinator SITA, office for Asia and the pacific said.
“Being a United Nations agency we have a development objective which involves exports increase, prices are better and the person who produces on the ground gets it better to make it sustainable,” he said.
Supporting India trade and investment for Africa (SITA) is a project financed by the United Kingdom’s department for international development (DFID) and runs from 2012-2020. The outcome of SITA is to improve competitiveness of select value chains: coffee, cotton, textiles, spices, sunflower oil, and leather among others in five EA countries: Ethiopia, Kenya, Tanzania, Rwanda, Uganda.