Because of its high accountability and limited corruption rate, Rwanda enjoys strong donor support. The start-up community profits from this. Rwanda, in collaboration with development partners, puts in place different incentives, credit lines and guarantee funds to help Small and Medium Enterprises grow.
The government incentivises entrepreneurs to start and operate their businesses. Incentives are two-fold: firstly, tax holidays and exemptions are available for investors in key sectors and, secondly, subsidies are available to some specific types of businesses (see below). The Corporate Income Tax holidays are provided to investors with significant start-up capital and those who are investing in key sectors such as energy, manufacturing, tourism, health and any other investment with a strong export focus. Corporate Income Tax (CIT) is usually calculated at 30% of the taxable income.
Tax exemptions are offered in the sectors that the government wants to sustain or promote. For instance, entrepreneurs in Rwanda don’t pay Value Added Tax (VAT) if they are selling agricultural or livestock products, inputs, materials or equipment. The same applies for entrepreneurs selling ICT equipment. The VAT is calculated at 18% and is paid by the final consumer of the product or service.
Subsidies are another financial mechanism the Government of Rwanda uses to support entrepreneurs. As with tax incentives, some key sectors that the government wants to promote or sustain benefit from subsidies. For example, all farmers (entrepreneurs or not) pay subsidised prices when purchasing agricultural seeds, fertilisers and irrigation equipment, usually at a 50% discount. Other subsidies target the manufacturing industry; SMEs benefit from partially funded access to product standardisation certificates.
Guarantee Funds and Lines of Credit
The mainstream guarantee funds and lines of credit supports are channelled through the Development Bank of Rwanda (BRD) and the National Bank of Rwanda (BNR). BRD uses its subsidiary, the Business Development Fund (BDF) to disburse the funds. The BDF supports SMEs to get credit from traditional financial institutions (banks, microfinance institutions and SACCOs) and avails partial credit guaranties to mitigate the risks. The guarantees cover 50-70% of the total requested fund. From 2011 until July 2019, BDF has served around 40,000 beneficiaries.
The BDF serves SMEs using four types of guarantee funds: the Agriculture Guarantee Fund, the SME Guarantee Fund, the Women Guarantee Fund and the Retrenched Civil Servants Guarantee Fund.
Attracting and providing entrepreneurship education is an important step that Rwanda has taken towards a holistic approach for developing a pipeline of entrepreneurs.
Non-Academic Education Providers
The surging number of entrepreneurs in Rwanda has triggered a growing number of entrepreneurship skills providers. Some key players are private foundations/non-profit organisations, public institutions and social enterprises. Programmes offered are delivered through group training, one-on-one coaching sessions and mentorship programmes. Most courses focus on finance, marketing and operations management.
Industry Research and Development
Research and Development is one of the key considerations in building a thriving entrepreneurial ecosystem. Through its research & innovation focused institutions, Rwanda is promoting the culture of creativity across young innovators, public sector and academia.
The National Industrial Research and Development Agency (NIRDA) is at the forefront of Industry Research and Innovation in Rwanda. The public institution empowers innovators to compete through technology monitoring, acquisition, development and transfer. An example of the key initiatives by NIRDA is the Innovate4Industry hackathon that attracted 25 teams of innovators to pitch their industry solutions.