RWANDA NGURIZA NSHORE ANNUAL REPORT FY19
October 1, 2018 – September 30, 2019 Project Period of Performance: April 2018 - 2023
This report is made possible by the support of the American people through the United States Agency for International Development (USAID). The content discussed is the sole responsibility of DAI and does not necessarily reflect the views of USAID or the US Government.
ANNUAL REPORT
YEAR 2, FISCAL YEAR 2019 (OCTOBER 1, 2018 – SEPTEMBER 30, 2019)
Rwanda Nguriza Nshore
Program Title: Rwanda Nguriza Nshore Sponsoring USAID Office: USAID Rwanda Contract Number: 72069618C00001 Contractor: DAI Global, LLC Contracting Officer Rep.: Clementine Mukeka Activity Manager: Mark Rostal Date of Publication: October 30, 2019 Author: The Nguriza Nshore Team
This report is made possible by the support of the American people through the United States Agency for International Development (USAID). The content discussed is the sole responsibility of DAI and does not necessarily reflect the views of USAID or the US Government
RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov
CONTENT
EXECUTIVE SUMMARY ...... i EVALUATION OF PROGRAM AREAS ...... 1 ACTIVITY OBJECTIVES ...... 1 COMPONENT I: EXPAND CAPACITY OF FINANCIAL INSTITUTIONS TO LEND TO SMEs ...... 2 COMPONENT 2: INCREASE PRIVATE AND COMMERCIAL INVESTMENT IN SMES ...... 2 COMPONENT 3: STRENGTHEN THE ENABLING ENVIRONMENT TO CREATE THE CONDITIONS FOR OFF-FARM SMEs TO INCREASE THEIR BUSINESS PERFORMANCE AND PROFITABILITY ...... 3 TECHNICAL IMPLEMENTATION ACTIVITIES ...... 5 FINANCIAL INSTITUTIONS CAPACITY BUILDING ...... 6 NGURIZA NSHORE’S COMPONENT 1 APPROACH ...... 6 HIGHLIGHTS AND SUCCESSES ...... 7 LESSONS LEARNED AND OPPORTUNITIES IDENTIFIED ...... 13 CHALLENGES AND MITIGATING MEASURES ...... 15 EXPANDED INVESTMENT IN RWANDAN SMES ...... 18 NGURIZA NSHORE’S COMPONENT 2 APPROACH ...... 18 HIGHLIGHTS AND SUCCESSES ...... 18 LESSONS LEARNED AND OPPORTUNITIES IDENTIFIED ...... 33 CHALLENGES AND MITIGATING MEASURES ...... 34 STRENGTHENING THE ENABLING ENVIRONMENT ...... 36 NGURIZA NSHORE’S COMPONENT 3 APPROACH ...... 36 HIGHLIGHTS AND SUCCESSES ...... 37 LESSONS LEARNED AND OPPORTUNITIES IDENTIFIED ...... 44 CHALLENGES AND MITIGATING MEASURES ...... 47 CROSS CUTTING THEMES ...... 48 GENDER ...... 48 YOUTH ...... 51 PERSONS WITH DISABILITIES ...... 53 CHALLENGED AND MITIGATING MEASURES ...... 54 LESSONS LEARNED AND OPPORTUNITIES IDENTIFIED ...... 55 MONITORING, EVALUATION & LEARNING ...... 56 HIGHLIGHTS AND SUCCESSES ...... 56
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LESSONS LEARNED AND OPPORTUNITIES IDENTIFIED ...... 61 COLLABORATING, LEARNING, AND ADAPTING...... 63 COLLABORATING ...... 63 LEARNING ...... 65 ADAPTING ...... 66 COMMUNICATIONS ...... 70 HIGHLIGHTS AND SUCCESSES ...... 70 OPERATIONS AND ADMINISTRATIVE ACTIVITIES ...... 73 DEVELOPMENT OF KEY DELIVERABLES FOR USAID ...... 73 ANNEXES ...... 74 ENVIRONMENTAL COMPLIANCE ...... 74 SUCCESS STORIES ...... 74 RWANDA NGURIZA NSHORE PERFORMANCE INDICATORS ...... 78
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ABBREVIATIONS AND ACRONYMS
ABR AB Bank Rwanda ACA Angel Capital Association AfDB African Development Bank AMIR Association of Microfinance Institutions in Rwanda ARED Africa Renewable Energy Distributor BV Baseline Value BDF Business Development Fund BK Bank of Kigali BNR National Bank of Rwanda BPR Bank Populaire du Rwanda BRD Development Bank of Rwanda BSAs Business Services Advisors BSP Business Service Provider CEO Chief Executive Officer CFO Chief Finance Officer CIBER Competitive Impact of Business Enabling Environment Reforms CLA Collaborating, Learning and Adapting COO Chief Operating Officer DCA Development Credit Authority EDP Entrepreneurship Development Policy EOI Expression of Interest FI Financial Institution FtF Feed the Future FY Fiscal Year GFSS Feed the Future Global Food Security Strategy GoR Government of Rwanda GT Bank Guarantee Trust Bank ICT Information and Computer Technology IFC International Finance Corporation IM Investment Memorandum ISIC International Standard Industrial Classification of All Economic Activities KBP Karisimbi Business Partners KCB Kenya Commercial Bank MEL Monitoring, Evaluation and Learning MELP Monitoring, Evaluation and Learning Plan
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MfDR Management for Development Results MFI Microfinance Institution MFIT Microfinance Investment Trust MIFOTRA Ministry of Public Service and Labor MIGEPROF Ministry of Gender and Family Planning MINAGRI Ministry of Agriculture and Animal Resources MINALOC Ministry of Local Government MINECOFIN Ministry of Finance and Economic Planning MINEDUC Ministry of Education MINICOM Ministry of Trade and Finance MINIYOUTH Ministry of Youth MOU Memorandum of Understanding MSME Micro, Small, and Medium Enterprise NBFI Non-bank Financial Institutions NCPD National Council of Persons with Disabilities NDA Non-disclosure Agreement NGO Non-governmental Organization NIRDA National Industrial Research and Development Agency NYC National Youth Council OCA Open Capital Advisers PLC Public Limited Company PoC Proof of Concept PSDAG Private Sector Driven Agricultural Growth Project PSF Private Sector Federation PWDs People with disabilities RBA Rwanda Bankers Association RCWE Rwanda Chamber of Women Entrepreneurs RDB Rwanda Development Board RFP Request for Proposals RSSB Rwanda Social Security Board RYAF Rwanda Youth Agribusiness Forum RYAF Rwanda Youth in Agribusiness Forum SACCO Savings and Credit Cooperatives SEZ Special Economic Zone SME Small and Medium Enterprise SOW Statement of Work TAs Transaction Advisors TAMIS Technical and Administrative Management Information System
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UN United Nations USAID United States Agency for International Development USD US Dollars USG US Government WCE Women’s Chamber of Entrepreneurs WIM Women Investors Mission initiativ WLN Women’s Lending Network ZOI Zones of Influence
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EXECUTIVE SUMMARY
Nguriza Nshore is pleased to submit the Activity’s Fiscal Year 2019 (FY 2019) Annual Report for the Feed the Future (FtF) Rwanda Nguriza Nshore Activity covering the period October 1, 2018 to September 30, 2019.
The Nguriza Nshore (Lend So I May Invest) Activity, herein referred to as Nguriza Nshore or the Activity, is a five-year project, ending on April 23, 2023, and implemented by DAI. The purpose of Nguriza Nshore is to foster rural economic growth by facilitating the emergence of a dynamic small and medium enterprise (SME) and agribusiness sector. By alleviating constraints to investment and increasing access to finance, Nguriza Nshore will accelerate the creation and growth of off-farm SMEs1 as an entry point for widespread economic growth and social development, increasing productive employment for rural populations, creating opportunities for entrepreneurs and reducing poverty throughout the country. Nguriza Nshore seeks to increase rural employment by expanding investment in off-farm SMEs throughout Rwanda. Nguriza Nshore’s geographic focus prioritizes the 13 districts of the new FtF zones of influence (ZOI). However, to leverage economies of scale in urban/peri-urban locations and expedite finance/investment, Nguriza Nshore will pursue opportunities outside of these priority areas to create a successful track record to pull in new financiers and investors.
During the reporting period, Nguriza Nshore made significant progress toward achieving contractual results. Results were underpinned by creating important and long-lasting relationships with a growing number of SMEs, Government of Rwanda (GoR) ministries and agencies, industry associations and key decision makers/luminaries. Nguriza Nshore developed a detailed understanding of the diverse financial services ecosystem, the evolving needs of SMEs (financing and technical assistance) and policy constraints limiting entrepreneurship.
Achievements are summarized by component below.
Component 1 – Expand Capacity of Financial Institutions to Lend to SMEs
After completing a Banking and Investment Analysis in FY 2018, Nguriza Nshore conducted a detailed financial baseline with financial institutions (FIs) revealing that banks and microfinance institutions (MFIs) lack standard definitions and products for SME finance. Most, if not all, FIs are not equipped to identify and manage risks associated with SME finance and agribusiness lending. And, FIs lack sector knowledge and expertise needed to finance SMEs and agribusinesses. Nguriza Nshore built critical partnerships with 14 FIs (nine banks and five MFIs) and the Activity began the process of creating opportunities to support SME finance and agribusiness lending with many of these partners.
With strong partnerships and relationships in place, Nguriza Nshore achieved success in many of its activities. Nguriza Nshore supported Cogebanque to develop a SME strategy, positioning the bank as a pioneer and market leader. Nguriza Nshore’s work with Cogebanque garnered growing interest with other FIs and it created numerous opportunities for Nguriza Nshore to build upon those relationships moving forward into FY 2020. In addition, Nguriza Nshore began crowding-in new business service providers (consulting firms)—niche, specialized and more experienced—into Rwanda, elevating consulting professionalism and expertise available for the financial services marketplace. Recognizing the dearth of de-risking mechanisms available to FIs and SMEs alike, Nguriza Nshore identified partnerships across a diverse variety of businesses (banks, non-banks and
1According to Nguriza Nshore, an SME is a firm with 1-100 employees
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SMEs) and the Activity designed solutions catered to their unique requirements. Moreover, Nguriza Nshore developed an important relationship with the Association of Microfinance Institutions in Rwanda (AMIR), the leading industry group for MFIs and Savings and Credit Cooperatives (SACCOs). AMIR and Nguriza Nshore co-designed the Microfinance Investment Trust (MFIT)—a revolving loan fund for AMIR’s membership and the first of its kind in Rwanda. MFIs and SACCOs play a critical role financing micro, small, and medium enterprises (MSMEs) and Nguriza Nshore’s partnership with AMIR creates the conditions to support entrepreneurs, start-ups and growing MSMEs.
Component 2 – Increase Private and Commercial Investment in SMEs
During FY 2019, Nguriza Nshore worked with numerous Rwandan SMEs through the Activity’s standard five-stage engagement process ranging from initial meetings with SMEs, co-creating technical assistance and investment readiness support, to eventually closing transactions. Throughout the reporting period, Nguriza Nshore engaged in numerous activities, including: road shows, SME workshops, networking events, and building out the Activity’s digital presence to create new channels for sourcing additional SMEs into the transaction pipeline. Nguriza Nshore identified and selected an increasing number of growth-oriented SMEs and co-designed customized investment readiness support. The Activity supported: ARED, BeneFactors, Brioche, GET IT, Legacy Clinics and Masaka Farms, among many others described in Component 2 below. Nguriza Nshore also worked beyond investment readiness by facilitating financial close for a handful of SMEs (also described in Component 2 below).
Beyond Nguriza Nshore’s work with individual SMEs, the Activity fostered crucial partnerships with industry platforms and associations outside Rwanda as a part of a long-term strategy to attract investors into the country. Unlike Kenya, which has more than 50 permanently-based—non- government—investment offices offering both debt and equity, Rwanda has none. Nguriza Nshore seeks to crowd investors into Rwanda so that they open permanent offices. Investors often locate their offices near the companies in which they have investments and, doing so, leads to more investment.
Nguriza Nshore fostered an important relationship with Sankalp Africa, the leading event for social entrepreneurship and impact investing, held each year in Nairobi, Kenya. The annual event promotes face-to-face linkages between SMEs, investors and ecosystem builders. Through this partnership, Nguriza Nshore sponsored nine Rwandan SMEs—BeneFactors Ltd., Brioche International, Chillington Rwanda, DeepSky Energies, Hollanda FairFoods, Ikirezi Natural Products, Kigali Farms, Iriba Water Group and Legacy Clinics—to attend the Sankalp Africa 2019 Summit. It was the first time Rwandan SMEs attended the summit and it served as a milestone toward placing Rwanda and Rwandan SMEs in front of investors. Nguriza Nshore plans to participate in the Sankalp Africa 2020 Summit and sponsor a new group of Rwandan SMEs.
In addition, Nguriza Nshore began building a long-lasting and durable partnership with the Angel Capital Association (ACA), a network of 14,000 angel investors based in the United States. In April 2019, Nguriza Nshore sponsored four Rwandan SMEs to attend and pitch their businesses at the ACA 2019 Summit in Chicago. The SMEs included: ARED, Brioche International, Chillington Rwanda, and Iriba Water Group. The SMEs received positive feedback from investors and, since the summit, Nguriza Nshore has continued to nurture the relationship with ACA and the Activity foresees continued interest in Rwanda by ACA’s leadership and its member investors. ARED received crucial feedback from American investors that led to the company rebranding itself. Nguriza Nshore also plans to participate in the ACA 2020 Summit in Denver and sponsor a new group of Rwandan SMEs.
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Nguriza Nshore also nurtured a relationship with Invest Africa US, an organization based in New York that represents a community of female investors who share a common interest in stimulating investment and economic growth in Africa. In September 2019, Invest Africa US facilitated a delegation of 10 executive-level women investors to Rwanda as a part of its inaugural Women Investors Mission Initiative, a platform for top female decision-makers from throughout the world. At a pitch event co-organized by Nguriza Nshore, five SMEs supported by the Activity—Agasaro Organics, Munyax Eco, Kigali Farms, and Water Access Rwanda—pitched their businesses to the investors. The evolving partnership between Invest Africa US and Nguriza Nshore will increase interest in and stimulate more investment into Rwanda.
Lessons learned about the Rwandan investment ecosystem during FY 2019 further animated and augmented Nguriza Nshore’s understanding of the overall market system, helping the Activity adapt and source three new transaction advisors. The new advisors will increase Nguriza Nshore’s SME pipeline and support closing additional transactions in FY 2020.
Component 3 – Strengthen the Enabling Environment for the Expansion of SME Agribusinesses and Support Firms
Nguriza Nshore also made significant progress toward creating a more business friendly, flexible and permanent SME enabling environment. To this end, Nguriza Nshore developed vital relationships with influential actors in the entrepreneurship ecosystem, including: the Private Sector Federation, the National Youth Council, the Women’s Chamber of Entrepreneurs, the Rwanda Development Board, the Business Development Fund, the Bureau of Standards, the Ministry of Agriculture, provincial governments, and other USAID/donor-funded projects. Nguriza Nshore also established a critical partnership with the Ministry of Trade and Industry (MINICOM).
Through this important partnership, Nguriza Nshore supported MINICOM to conduct a country- wide survey of needs and gaps in the entrepreneurship ecosystem, covering 20 districts of Rwanda and consulting over 300 stakeholders. The information collected informed the development of the Entrepreneurship Development Policy (EDP) which was produced in close partnership with MINICOM to address challenges identified in the entrepreneurship ecosystem. As expressed by the Government of Rwanda, “the EDP is a critical milestone necessary to underpin economic growth, social development and employment creation.” After the draft policy was co-developed, Nguriza Nshore supported MINICOM to engage diverse constituencies and encourage ownership over the policy at all levels of Rwanda society. Through this joint effort with MINICOM, validation workshops were held in all five provinces with a focus on women, youth, and persons with disabilities. Throughout the process, Nguriza Nshore encouraged MINICOM to emphasize implementation post-policy approval, anticipated before calendar year 2020, and monitoring, reporting and learning. The successful EDP development process led MINCOM to request Nguriza Nshore’s support in implementation and that the Activity hire and second an embedded advisor in the office of the Permanent Secretary.
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EVALUATION OF PROGRAM AREAS
ACTIVITY OBJECTIVES
In FY 2019, Nguriza Nshore facilitated $1,252,961 in agriculture-related financing, meeting the FY 2019 EG.3.2-27 target. A total of 11 SMEs and 372 microenterprises received financing. The debt financing totaled $797,577 and the non-debt financing was $455,384. Many opportunities contributed to reaching this target, including the factoring reflows from BeneFactors, a non-bank financial institution. Nguriza Nshore also leveraged $1,324,743 in private sector investment and $350,568 of US Government Commitment under indicator EG.3.1-14, slightly lower than target. With FY 2019 the first full year of implementation, the duration from pipeline sourcing to closing investment deals was slower than Nguriza Nshore originally anticipated and one of the major lessons learned during the reporting year. Given a multitude of factors described in the Component 2 section, Nguriza Nshore learned that it requires six to nine months for to complete due diligence with Rwandan SMEs before they can be ready to move forward with investor discussions. Currently, there are many SMEs in deal making conversations with investors and those transactions will likely close during the first half of FY 2020. Nguriza Nshore is confident in achieving the investment target for FY 2020 and has already put in place the following mitigating measures. Nguriza Nshore will mitigate delays in closing by sourcing new transaction advisors (TAs) in the first quarter of FY 2020 that have robust SME pipelines already undergoing due diligence. Due to the strong relationships established with their pipeline SMEs, the new TAs will more quickly move these businesses to financial close, enabling Nguriza Nshore to reach its private sector investment target in FY 2020. Nguriza Nshore also facilitated the creation of 1,927 jobs during FY 2019. In total, the investments and financing Nguriza Nshore facilitated created 385 permanent jobs and 1,541 temporary jobs in the Rwandan economy. The jobs figure, derived from the employment multiplier produced by the Activity during FY 2019, is dependent on overachieving both the finance and investment targets. Therefore, Nguriza Nshore, did not meet its FY 2019 jobs target. The Activity anticipates the jobs number will increase as it facilitates more private sector investment in FY 2020 as a result of overachieving finance and investment targets. Table 1: Overall Target
FY19 Annual Percent Life of Indicator Cumulative Target Achieved Activity Progress FY19 Target Q1 – Q4 FY19 % Value
1. EG.3.2-27 Value of agriculture-related $1,252,961 $1,200,000 104% $15,000,000 financing accessed as a result of USG assistance [IM-Level] 2. Number of jobs created with USG 1,927 2,597 74% 30,000 assistance (Custom) 3. EG.3.1-14 Value of new USG commitments and private sector investment leveraged by the $1,675,311 $3,000,000 56% $30,000,000 USG to support food security and nutrition [IM-Level]
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COMPONENT I: EXPAND CAPACITY OF FINANCIAL INSTITUTIONS TO LEND TO SMEs
In FY 2019, Nguriza Nshore leveraged $690,888 in loans using de-risking tools. This is 668% over the target of $180,000. The loans were extended to 372 microenterprises and two SMEs. During FY 2019, Nguriza Nshore learned that the dearth of de-risking tools poses a major challenge for businesses to access finance and financial institutions are not financing companies since they lack the know-how and tools. Thus, more Component 1 Activities have centered on de-risking than originally anticipated. Nguriza Nshore also provided assistance to 33 financial institutions including one bank, one non-bank financial institution (NBFI), seven microfinance institutions (MFIs), and 24 Savings and Credit Cooperatives (SACCOs) reflected in indicator 1.2. These institutions have confirmed that they have financed SMEs after receiving assistance from Nguriza Nshore.
Table 2: Component 1 Targets
FY19 Annual Percent Life of Indicator Cumulative Target Achieved Activity Progress FY19 Target Q1 – Q4 FY19 % Value 1.1 Value of loans leveraged using de-risking $690,888 $180,000 668% $5,900,000 tools (Custom) 1.2 Number of financial and non-financial institutions receiving USG assistance that 33 32 104% 198 extended loans and other financial products to SMEs (Custom)
COMPONENT 2: INCREASE PRIVATE AND COMMERCIAL INVESTMENT IN SMES
Nguriza Nshore measures its impact on SMEs by tracking the value of annual sales of the firms it supports under indicator EG.3.2-26. This indicator value is $5,119,721 which reflects the aggregate baseline sales value of six firms Nguriza Nshore worked with during FY 2019 and their 309 distinct suppliers. These six firms made it to the final deal making stage through which Nguriza Nshore can substantiate a strong connection between the Activity’s assistance, investment in the SME, and a subsequent increase in annual sales. The largest sales categories were for agricultural commodities, totaling $1,818,717 and for post-harvest processed products, totaling $1,581,821 for the baseline year.
Nguriza Nshore supported SMEs recruited more labor from investment they received as reflected under the 2.2 indicator. The result is observed from a baseline question that asks companies to project their hiring in the next three months and then a comparison question is asked during a follow up survey. The follow up was done for four firms. Two firms indicated they would not hire additional employees citing exogenous factors causing them not to hire (closure of the Ugandan border and capital investment in production equipment that would reduce the need to hire and laying off manual labor, primarily men, because of mechanization). Nguriza Nshore will continue tracking the connection between mechanization, gender, and labor. The 2.2 indicator is dependent on these exogenous factors as well as workforce fluctuations and the capital to labor ratio of
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In FY 2019, Nguriza Nshore also delivered technical assistance to 117 businesses. These companies were sourced by the Activity through a variety of means and methods, described in the Component 2 section of this report, including word of mouth, applications through the Activity website, walk-ins to the office and digital connections generated on social media and through email. In addition, Nguriza Nshore hosted a large SME workshop during the first quarter of FY 2019 and 70 participants attended with more SMEs seeking to attend but unable to due to space constraints. Nguriza Nshore hosted another SME workshop during the second quarter of FY 2019 as well as targeted workshops in the third quarter including one co-organized by the Ministry of ICT and another event as part of the Young Founder’s Conference organized by Westerwelle Start-up Haus. Throughout the reporting period, Nguriza Nshore improved upon its ability to build, leverage and sustain networks as a means to source SMEs which will continue into Nguriza Nshore’s FY 2020 approach. Table 3: Component 2 Targets
FY19 Annual Percent Life of Indicator Cumulative Target Achieved Activity Progress FY19 Target + 20% 2.1 EG.3.2-26 Value of annual sales of firms Baseline value $5,119,721 100% increase over and farms receiving USG assistance [IM-Level] (B.V.) baseline value
2.2 Percentage of firms receiving direct + 10% Baseline value support by the Activity that report being able 50% 100% increase over (B.V.) to recruit more labor as a result of investment baseline value (Custom) 2.3 Number of firms receiving USG-funded technical assistance for improving business 117 100 117% 500 performance (Custom)
COMPONENT 3: STRENGTHEN THE ENABLING ENVIRONMENT TO CREATE THE CONDITIONS FOR OFF-FARM SMEs TO INCREASE THEIR BUSINESS PERFORMANCE AND PROFITABILITY
Nguriza Nshore achieved 19 policy milestones, exceeding the EG.3.1-d indicator by 238% and resulting in the successful EDP design and development process that included extensive nation-wide data collection, interactive policy formulation and drafting, as well as numerous validation workshops. A total of 12 national and seven sub-national milestones were achieved. The Activity completed eight “inclusivity and stakeholder consultation” milestones, three “policy development and coordination” milestones and three “policy implementation” milestones. The process occurred over a 12-month process but moved forward quickly due to the strong backing and support by the national government. Each stage of the inclusive process received increasing support, generating improved momentum and garnering ongoing endorsement and buy-in—leading to a high number of milestones achieved within during the reporting period.
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Table 4: Component 3 Targets
FY19 Annual Percent Life of Indicator Cumulative Target Achieved Activity Target 3.1 EG.3.1-d Number of milestones in improved institutional architecture for food 19 8 238% 54 security policy achieved with USG support [Multi-Level]
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TECHNICAL IMPLEMENTATION ACTIVITIES
Nguriza Nshore fosters rural economic growth, social development and employment creation by facilitating the emergence of a dynamic agribusiness sector in Rwanda. Activities focus on three key components as described in Figure 1.
Figure 1 Rwanda Nguriza Nshore Results Framework
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FINANCIAL INSTITUTIONS CAPACITY BUILDING
NGURIZA NSHORE’S COMPONENT 1 APPROACH
During the reporting period, Nguriza Nshore made significant progress toward achieving its goals in Component 1. The Activity developed a comprehensive understanding of the financial services ecosystem and individual actors, including FIs and SMEs; it cultivated strong relationships with key financial system partners; it co-created technical assistance scopes of work with 14 banks and MFIs; and, it developed a strong relationship with AMIR to expand Nguriza Nshore’s reach with MFIs and SACCOs. Significant work was undertaken in developing a comprehensive SME strategy for Cogebanque and devising de-risking mechanisms for BeneFactors, Goshen Finance and Zamura Feeds and Kigali Farms.
Nguriza Nshore Component 1 Theory of Change Current Market System Context ● The formal banking sector has evolved to target medium to large established businesses, larger SACCOs and the Government of Rwanda, which has limited the value/investment in retail banking products like tailored loans and diverse saving products. ● Financial intermediation occurs from depositors to medium to large established businesses and government – limiting inclusive growth and concentrating wealth. ● Banks have traditionally competed on medium to large established businesses and the government – this practice stifles innovation (rick taking and product development) and it limits SME growth and expansion. ● As more banks have started to work in Rwanda and international economic integration has proceeded, competitive pressure has recently emerged, pushing medium and smaller banks to be more aggressive in searching for new market segments (SME, agriculture and agribusiness). ● Non-bank lending organizations, including MFIs and SACCOs are active but remain less mature as a market segment within the financial system and operate as niche providers. ● MFIs and SACCOs, while evolving toward a more commercially viable orientation, remain narrowly focused and do not provide a diverse set of services to finance the varied needs of entrepreneurs and SMEs. ● Insurance products are limited to a limited band of basic products indicating narrow penetration, especially in response to bottom-of-the-pyramid clientele in rural communities that face substantial risks that could be mitigated via de-risking mechanisms.
Future Market System Change ● Shift competitive landscape1 to pull banks and non-banks toward client-oriented growth. ● Top-down change (i.e. corporate to SME) results from client-oriented growth and the competitive pressure of pulling banks to constantly innovate and seek new and emerging market segments, including bottom-of-the-pyramid clientele. ● Banks compete for bottom-of-the-pyramid via a full range of tailored products targeting SMEs, entrepreneurs and households that include both savings and lending-based products. ● Bottom up change (solidarity groups/MSMEs to larger SMEs) results from client-oriented growth and the competitive pressure of pulling/pressurizing non-banks to expand their service offers, create tailored products, and evolve toward larger, growth-oriented SMEs.
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HIGHLIGHTS AND SUCCESSES
Survey of Rwandan Finance and Banking Sector and Financial Baseline
Prior to beginning work with FIs, Baseline data from banking sector demonstrates non- Nguriza Nshore first conducted a standardization throughout the sector and different Banking and Investment Analysis in practices lending to SMEs, agriculture and women FY 2018 to better understand the financial services ecosystem. During Nguriza Nshore conducted an intensive financial baseline with FIs revealing that banks and MFIs lack standard definitions and products for FY 2019, Nguriza Nshore put this SME finance. Most, if not all, financial institutions are not equipped to learning into practice and devised identify and manage risks associated with SME and agribusiness finance. strategies to support individual FIs that will lead to systemic change. In • SME lending ranges from 10 – 75% of a bank’s total portfolio, reflecting large differences in lending practices addition, during FY 2019, Nguriza • 9 banks have an SME definition, but there are 9 different SME Nshore conducted a financial definitions in total meaning the definition differs for each bank baseline with FIs to track • 5 banks indicate they have financial products specifically demonstration effect later in the life designed for SMEs but some noted these products are the of the project. The baseline, same ones used for corporate clients • Agriculture lending ranges from 0.20 – 15% of a bank’s total conducted during the third quarter portfolio, reflecting bank hesitancy to finance the agricultural of FY 2019, consisted of a large sector sample of all major banks (small and • Only 4 banks have agriculture lending units medium), MFIs, and SACCOs. From • 5 banks do not distinguish agriculture from agribusiness in their lending portfolio the baseline, Nguriza Nshore • Only 1 bank has a women’s banking unit produced standardized profiles that • The percentage of female clients ranges from 15 – 70% of provided quick scans of each FI, banks’ total individual customers their lending products and an overview of the financial industry. *Nguriza Nshore surveyed 13 out of 16 banks in Rwanda in November – December 2018 Insights from these profiles informed how Nguriza Nshore approaches its work with individual FIs.
Relationship Building with Key Financial System Actors
Throughout FY 2019, Nguriza Nshore established and nurtured relationships with key actors in the financial sector since it’s important to have strong partnerships with banks, non-banks and industry associations to better understand their current behaviors, risk appetites and willingness to partner. Relationships established are Financial baseline survey with MFI in Rwanda outlined below:
International Finance Corporation (IFC). During the first quarter of 2019, Nguriza Nshore held a meeting with the IFC to gain an overview of the financial sector in Rwanda. In addition to providing insight into the financial services ecosystem, the IFC recommended Nguriza Nshore work with I&M and KCB, two large banks and IFC partners. Nguriza Nshore held meetings with these banks following discussions with the IFC.
Rwanda Bankers Association (RBA). In the second quarter of FY 2019, Nguriza Nshore delivered a presentation to the RBA and its membership on the project and potential partnership
7 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov areas. Nguriza Nshore began meeting with individual banks prior to the presentation but the partnership with RBA was essential since the opportunity served as endorsement by the association. Following the presentation, Urwego Bank, a large MFI, contacted Nguriza Nshore and negotiations took place on potential partnership and technical assistance opportunities. Likewise, later in the fiscal year, RBA itself, approached Nguriza Nshore seeking collaboration and requested support for designing an agriculture finance course for its membership.
Business Development Fund (BDF). BDF approached Nguriza Nshore in the second quarter of FY 2019, requesting technical assistance on financial and non-financial analysis, project/funding analysis, business development and marketing, and client monitoring and evaluation. After building a relationship with the Rwandan Ministry of Trade and Industry (MINICOM), and at the request of MINICOM, Nguriza Nshore postponed providing technical assistance to BDF until the Entrepreneurship Development Policy (EDP) is passed. One of EDP’s key recommendations calls for restructuring BDF. Nguriza Nshore will reopen the conversation about providing technical assistance with BDF in FY 2020 after EDP implementation begins.
Association of Microfinance Institutions in Rwanda (AMIR). AMIR is an industry association with 343 licensed MFIs and SACCOs as its members. Nguriza Nshore began building a relationship with AMIR during the second quarter of the reporting period. AMIR contacted Nguriza Nshore after its presentation to RBA, seeking support in designing customized products, creating improved marketing techniques, producing agribusiness software for MFIs and SACCOs, and providing financial literacy to its membership. Throughout the year, Nguriza Nshore worked with AMIR to negotiate and design technical assistance the Activity will provide AMIR. During the final quarter of FY 2019, Nguriza Nshore directly supported and provided AMIR with technical assistance (described in detail below).
National Bank of Rwanda (BNR). Nguriza Nshore held an introductory meeting with BNR during the second quarter of the reporting period and subsequent discussions took place through the fiscal year. Current discussions are centered on supporting AMIR’s Microfinance Investment Trust and BNR’s supervisory and regulatory role, including drafting attendant policies and procedures for the trust. In addition, MINICOM requested Nguriza Nshore draft a short explanatory document describing the positive consequences a Private Equity Law will generate for the country to obviate BNR’s potential concerns.
Ministry of Finance and Economic Planning (MINECOFIN). Nguriza Nshore also began to establish a relationship with MINECOFIN during the reporting period. In an initial meeting, Nguriza Nshore presented the scope of the Activity and the type of support it provides. MINECOFIN is interested in working with Nguriza Nshore and the Activity will likely work with the ministry during FY 2020 under Component 2 and 3 in developing a Private Equity Law since it will likely be the lead ministry.
Partnership Building and Co-creation with Financial Institutions
Throughout the reporting period, Nguriza Nshore established partnerships with several FIs (described below). To reach the Activity’s Component 1 goal to expand the capacity of financial institutions to finance SMEs and agribusinesses, Nguriza Nshore intends to work with an increasing number of FIs during FY 2020 and over the life of project. During FY 2019, Nguriza Nshore created important partnerships with many FIs (outlined in Table 5).
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Nguriza Nshore follows a linear engagement process to create partnerships with FIs followed by go/no go decisions.
• Hold initial meetings to explain Activity goals and technical assistance offerings (go/no go) • Sign a non-disclosure agreement (NDA) to protect client information (go/no go) • Co-create technical assistance that aligns with Nguriza Nshore’s goals and partner needs (go/no go) • Design a technical assistance scope of work; prepare a request for proposal; competitively source and contract a consultant or consulting firm to undertake the assignment (no/no go) • Deliver and complete the technical assistance assignment (go/no go) • Assist the partner to amplify results of the technical assistance where required (go/no go)
Table 5: Financial Institutions Nguriza Nshore Worked with in FY 2019 - redacted
Cogebanque SME Strategy
Cogebanque, a mid-tier bank, was one of the initial FIs Nguriza Nshore entered into discussions with and moved forward into a technical assistance partnership.
In 2018, Cogebanque developed a five-year strategic plan and, as part of that process, the bank prioritized SME finance as an important growth driver for its future expansion and profitability. As a result, Cogebanque approached Nguriza Nshore during the first quarter of FY 2019 to develop its SME strategy. Nguriza Nshore developed a draft SME strategy during the second quarter of FY 2019 as well as an inception report including background research and a plan for implementation. During the third quarter of FY 2019, Nguriza Nshore incorporated Cogebanque’s input on the strategy and worked with the bank to validate it. During the fourth quarter of FY 2019, Nguriza Nshore began working with Cogebanque to operationalize the strategy. Implementation of the strategy will continue into FY 2020.
Significant elements of the strategy include:
• Lending process re-design
• Market research and new product development support
• Implementation leadership (activity and change management)
Cogebanque’s SME strategy is important for Nguriza Nshore and the financial services ecosystem since it signals that banks are beginning to prioritize SME finance. After Cogebanque implements its new strategy, the bank’s success will send clear signals to the marketplace, helping to crowd-in other FIs seeking to replicate Cogebanque’s achievements. The SME strategy is also critical for Cogebanque because it will enable the bank to mitigate risk, identify new clientele and expand its SME portfolio. Redacted.
Cogebanque Endorsement and the Knock-On Effect
Nguriza Nshore’s work with Cogebanque served as an endorsement and established project credibility. The bank’s endorsement helped Nguriza Nshore build a solid pipeline of FIs that the Activity plans to support in FY 2020, specifically: BRD, Duterimbere, Umutanguha and Urwego. Nguriza Nshore will also continue to amplify Cogebanque’s success as it moves to implement its SME strategy, thus crowding-in additional FIs for technical assistance.
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Improving the Professionalism and Performance of Business Service Providers (BSPs)
Through Nguriza Nshore’s work with Cogebanque, the Activity began improving the professionalism and performance of Business Service Providers (BSPs) in Rwanda by crowding-in new consulting firms; and likewise, the crowding-in has increased the expectations of FIs for the services they receive. BSPs play a critical role in private sector development and improving the financial services ecosystem by expanding innovation. However, Rwandan BSPs are not specialized in financial sector consulting and their services do not meet the changing needs required by FIs. During the reporting period, Nguriza Nshore crowded-in a new business service provider to the Rwandan market, a firm with extensive experience in countries outside of Rwanda and with FIs of varying sizes and complexity. (In addition, Nguriza Nshore also facilitated other regionally-based consultants to support SMEs.) This signals to other Rwandan BSPs that they need to increase their professionalism, knowledge and expertise to remain competitive and relevant. Nguriza Nshore will continue to raise the standard of BSPs as the Activity continues working with more FIs and new service providers through competitive procurements in FY 2020.
Expanding De-Risking Mechanisms and Tools
Nguriza Nshore expanded the use of de-risking mechanisms by:
Increasing de-risking through invoice financing. During FY 2019, Nguriza Nshore partnered with BeneFactors Ltd, an invoice discounting company, to scale their business and expand financing for their MSME clientele. BeneFactors offers a product that other FIs do not provide by purchasing invoices from companies and therefore helping them with their short-term working capital needs (refer to the textbox below: “What is invoice financing?”).
What is invoice financing?
Most Rwandan SMEs encounter cash flow challenges, especially start-ups and young growing companies. These businesses must often wait to receive payment for their goods and/or services from vendors. For example, a fresh produce supplier delivers bananas to a major supermarket in Kigali. After delivering the bananas, the supplier receives an invoice from the buyer and she could wait 30 to 90 days for the supermarket to pay the outstanding invoice. Meanwhile, the supplier must pay their employees, farmers, transporters, etc. This cash flow problem forces many new businesses to fail. Enter BeneFactors. BeneFactors purchases the invoice from the supplier, at a discount to its full value, and provides with the company with immediate cash so that it can continue operating. The agreement solves the fresh produce supplier’s cash flow problem and it also relieves them from pursuing payment which is transferred to BeneFactors. All three companies win—the supplier, the supermarket (since they continue receiving fresh produce uninterrupted from the supplier), and BeneFactors. All three companies continue growing and all three companies have the potential to create employment. It’s a win-win for the economy at large.
Invoice financing is an extremely effective alternative financing method in emerging markets. Nguriza Nshore considers invoice factoring as non-debt financing under EG.3.2-27 as confirmed by Ms. Anna Brenes, Data Steward for the USAID Bureau for Food Security on the October 9, 2019 Webinar on the FY 2019 FTF monitoring system reporting hosted by USAID Bureau for Food Security. Nguriza Nshore’s partnership with BeneFactors served three unique purposes by expanding de- risking mechanisms in Rwanda.
Invoice financing is considered de-risking because it transfers credit risk of the account debtor (buyer) from the SME (supplier) to the factoring company (financial intermediary). If an SME has
10 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov many invoices with one buyer, the factoring service becomes more crucial to the success of the business. When the invoice is transferred to the factoring company, the SME faces less risk from non-payment should the buyer be unable to service its debt. The repayment risk is transferred to the factoring company or financial intermediary from the SME.
Invoice financing also serves as a de-risking mechanism because it forces SMEs to improve their financial reporting so the factoring company can gain a complete understanding of their business— income statements, balance sheets and cash flows. The same requirement applies to the buyers since, after the factoring company purchases the invoice from the SME, the repayment risk is transferred to the factoring company. Both the supplier and buyer accrue the benefits of building historical business information that can be used to secure traditional finance from banks, such as cash-flow based lending and asset-backed finance.
BeneFactors provides factoring and de-risking to numerous SMEs. Redacted. Unlike highly capitalized and liquid Rwanda commercial banks, BeneFactors is cash constrained and unable to finance its growing pipeline of SMEs internally from retained earnings. BeneFactors’ waiting list for new clients was 2.5 times greater than their ability to purchase invoices. Since agribusinesses and SMEs on their waiting list had already been pre-qualified, the grant funding was immediately deployed.
Redacted.
Additionally, Nguriza Nshore’s grant of $100,000 to BeneFactors served as a de-risking mechanism by supporting BeneFactors’ ability to raise private capital from investors to finance their growth needs. The company anticipated the grant would underpin and support their efforts to raise private capital from institutional investors and commercial banks—leading to their asset base growing to $1 million by leveraging the Nguriza Nshore grant. The grant provided by Nguriza Nshore established a proof-of-concept and allowed BeneFactors to break through the “too small” for private capital barrier thereby creating the conditions for the company to access commercial credit lines and investment from venture capitalists, angel investors and high-net worth individuals. Redacted.
As BeneFactors continues to expand, it will crowd-in other actors into invoice discounting who have larger and more robust balance sheets to purchase invoices, including Rwandan commercial banks, creating improved access to financial services for SMEs throughout the country.
De-risking between an agribusiness and a MFI. In FY 2019, Nguriza Nshore successfully facilitated a financial de-risking mechanism between an agribusiness, Zamura Feeds, and a MFI, Goshen Microfinance. This innovative partnership provided a de-risking mechanism between Zamura Feeds, their farmer clientele and Goshen Finance, creating an innovative model, new for both Rwandan agriculture value chains and the financial services marketplace. It also has the potential for replication into other agriculture commodities.
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Zamura Feeds, a leading manufacturer of animal feeds in Rwanda, in partnership with the USAID Tworore Inkoko Activity, trains farmers in Northern Province to raise hatchlings, providing them high quality feeds and technical assistance. On contract, Zamura Feeds purchases the adult chickens from the farmers that Zamura then sells forward to other buyers. Until the partnership with Goshen Finance was facilitated by Nguriza Nshore, Zamura Feeds financed its farmers to purchase hatchlings and other essential inputs from its limited balance sheet. Zamura’s low capital base restricted the number of farmers the company could finance which, in turn, constrained Zamura’s growth and profitability. It What are de-risking mechanisms? also presented significant risk for the company since it’s not a FI—they had to manage repayment risk and Nguriza Nshore considers de-risking as approaches, mechanisms and/or tools potential default. used by FIs to manage and reduce risk. In the Rwandan context, FIs are Zamura Feeds sought to continue providing inputs, reluctant to finance SMEs and extensions services and markets for farmers but they did agribusinesses because they are not want to play the role of a FI. Partnering with a FI considered “too risky” and they either would allow Zamura Feeds to channel its finances into its don’t provide finance to these sectors or they price their loans at core business functions, source more farmers and grow unaffordable rates, greatly restricting profits while the FI would undertake financing and debt access. Nguriza Nshore offers tailored collections. consulting (an approach) to manage and reduce risk; it also designs Understanding that both Zamura Feeds and the FI would mechanisms (tripartite agreement with benefit, Nguriza designed a de-risking mechanism and the Zamura and Goshen); and it facilitates Activity identified an appropriate partner, Goshen guarantees (through USAID’s Development Credit Authority). Finance, after designing the scheme.
• Redacted.
• Nguriza Nshore subsidized the loan amount that Goshen Finance offered by 2% per annum and the Activity covered the origination and administrative fees—benefiting both Goshen and the farmers.
• Goshen considered agriculture lending high risk and it would not finance the farmers without an interest rate subsidy and fee buy-down from Nguriza Nshore. However, Goshen agreed that should repayment exceed 95%, they would provide financing without the interest rate subsidy and fee buy-down, recognizing Zamura would be well positioned to shop the de-risking mechanism to other FIs after establishing a successful track record with Goshen.
Expanding de-risking with loan guarantees. In FY 2019, Nguriza Nshore established a partnership with Kigali Farms, an SME focused on commercial mushroom production. Nguriza Nshore supported Kigali Farms with investment readiness support, including a detailed business assessment and a financial model. Kigali Farms had never developed a financial model with growth projections. The business assessment was incorporated and it forecasted Kigali Farms’ expansion strategy, cash flows and profitability using historical data as a baseline. With that information, Kigali Farms marketed its new business strategy to Oxfam while entering into discussions with GT Bank for debt financing. GT Bank was unwilling to finance Kigali Farms without a guarantee. Redacted. Without the consulting work provided by Nguriza Nshore, Kigali Farms would not have been able to provide Oxfam and GT Bank with the information necessary for them to understand their business and design a de-risking mechanism to underpin a loan.
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Increasing Access to Finance for MSMEs by Building Partnership with AMIR
During FY 2019, Nguriza Nshore established a strong relationship with AMIR. As the industry association representing 343 MFIs and SACCOs, AMIR is a key market system actor ensuring MSMEs have greater access to finance. During FY 2019, Nguriza Nshore supported AMIR through the following activities:
Nguriza Nshore assisted AMIR to better understand the needs of its membership. AMIR initially approached Nguriza Nshore to provide its membership with generic training. However, the financial baseline conducted by Nguriza Nshore revealed AMIR membership wanted targeted training on specific topics and customized consulting. Nguriza Nshore worked with AMIR to incorporate member feedback into their request for technical assistance, beginning a process of collaboration and co-design for SME and agriculture finance. As a result, Nguriza Nshore trained 33 MFI and SACCO managers on credit management during the fourth quarter of FY 2019. The Activity expects to deliver additional training and consulting to AMIR membership during FY 2020.
Nguriza Nshore helped AMIR develop a Microfinance Investment Trust. MFIs and SACCOs currently borrow from banks and they intermediate loans to their clientele. Consequently, MFIs lend at very high interest rates (averaging 24%). According to the design of the trust, AMIR members will make contributions to the MFIT and the fund will lend to its membership for on- lending. As a result, MFIs will reduce their interest rates to 14-15% per annum, helping improve access for the clientele their member MFIs and SACCOs serve. Later, Nguriza Nshore will help raise outside funding to further capitalize the fund.
At the request of AMIR, Nguriza Nshore attended a high-level workshop that brought together regulators, thought leaders and practitioners from the financial services industry, including: the National Bank of Rwanda, the Ministry of Finance, MFI/SACCO representatives, and other development partners. Following the workshop, Nguriza Nshore supported AMIR in conducting a country-wide awareness campaign to promote the fund among its membership and Nguriza Nshore accompanied AMIR to10 districts meeting with various MFI/SACCO leaders and local government officials. AMIR requested Nguriza Nshore help administer the fund during its start-up, help raise capital and support the BNR with its regulation and supervision of the trust.
LESSONS LEARNED AND OPPORTUNITIES IDENTIFIED
Southern Province SACCOs do not lend. While conducting the AMIR MFIT awareness building campaign, Nguriza Nshore discovered that Southern Province SACCOs do not lend; instead, they place member savings in deposit accounts with commercial banks, earning 8% annually.
Nguriza Nshore, through AMIR, will encourage Southern Province SACCOs to join the MFIT and earn an equivalent interest rate so that their deposits can be intermediated to AMIR membership for on-lending. Nguriza Nshore will also support Southern Province SACCOs develop strategies, plans and products to lend into their communities and businesses.
SACCOs are unaware of BNR regulations. BNR established a 24% interest rate for new SACCOs covering an initial two-year startup period—SACCOs must not lend below 24% for their first two years of operations. Many SACCOs continue lending at 24% after the two-year period expires and most are unaware of the expiration date.
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SACCOs do not lend as much as they should. Many SACCOs are risk adverse, do not understand how to manage and reduce risk, and therefore do not intermediate deposits into loans— they deposit member funds at commercial banks. In addition, corruption perceptions are high and there is fraud in the system (according to stakeholders but unsubstantiated by the Activity) since owners and managers have significant autonomy and power operating in relatively uneducated communities. These issues must be taken into consideration implementing the MFIT but it also creates opportunities to focus on membership/community awareness building, training SACCOs on best practice credit management approaches and BNR regulation/supervision.
Training MFIs and SACCOs must be geographically customized for institutions. MFIs and SACCOs have different needs based on their geography, institutional type, size, sophistication and age. Furthermore, the entrepreneurial culture is not homogenous throughout Rwanda, which is reflected in how MFIs and SACCOs operate, and therefore each province requires customized interventions and solutions.
For example, female MFI managers in Southern Province have expressed interest to create a Women’s Lending Network (WLN). The idea was initiated by a female bank manager who established a special product for women in microfinance. After starting in Southern Province, the WLN plans to expand across Rwanda. This initiative is one Nguriza Nshore will consider supporting in FY 2020.
Nguriza Nshore’s support to Cogebanque helped established its credibility throughout the sector. The credibility Nguriza Nshore established by successfully assisting Cogebanque to develop their SME strategy has piqued the interest of other banks to seek technical assistance from the Activity which they were previously hesitant to pursue. For example, Nguriza Nshore’s work with Cogebanque spurred BRD to request technical assistance from the Activity. In addition, the Cogebanque partnership created opportunities for Nguriza Nshore to begin working with a new group of FIs in FY 2020, including: Urwego Bank, Equity Bank, Duterimbere, and Umutanguha Finance Company Ltd.
Successful partnership with Cogebanque on SME finance created new opportunities inside the bank. Success begets success and, as a result, Cogebanque requested additional support from Nguriza Nshore to improve and expand the performance of its trade finance department, particularly in sourcing exporters. This new request could be an important opportunity for Nguriza Nshore because it will accelerate the growth of SMEs working as importers and exporters. Support in this area will seamlessly dovetail and build upon the SME technical assistance.
Lack of capital is not a challenge for FIs. From small MFIs to large banks, they typically have adequate capital and strong balance sheets but they do not finance SMEs or agriculture. They lack tailored products since they do not understand the sectors and how to manage and price risk. Since capital is not a constraint and, with Nguriza Nshore’s growing reputation in the financial sector, the Activity is well placed to align its consulting interventions with FI needs.
Loan portfolio guarantees. With Cogebanque’s SME strategy approved, the bank will soon receive a $6 million loan from the African Development Bank (AfDB) to underpin its financing. With both components—the strategy and loan—in place, and supported by implementation consulting from Nguriza Nshore, Cogebanque is well positioned for a DCA loan guarantee. And, with these three elements working together, should the DCA be placed, other banks will most likely approach Nguriza Nshore and USAID for support.
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Banks must meet new BNR requirements and are focused on strategy development. BNR has released new requirements for financial institutions such as increasing the share capital requirements from $5.5 million to $22 million. Most banks must restructure and re-capitalize or become acquisition targets. This new reality presents both challenges and opportunities. Two banks, Nguriza Nshore was co-designing SME strategies with, merged and the Activity paused support. Banks choosing to restructure and re-capitalize could seek support from Nguriza Nshore. The Activity will pursue these latter opportunities during FY 2020.
Nguriza Nshore must collaborate and co-create with partners from the initial concept note stage. Nguriza Nshore observed that FIs approaching the Activity for technical assistance often need pre-support—they don’t know what they want and/or need and they do understand the engagement process. Nguriza Nshore spends significant time upfront building trust, establishing the relationship and guiding them through a process of understanding what they need to enter a specific market or niche and what Nguriza Nshore can and cannot provide. CHALLENGES AND MITIGATING MEASURES
Building financial sector partnerships requires patience and persistence. Much of FY 2019 was devoted to building Nguriza Nshore’s reputation in the financial sector. Conducting the financial baseline research, Nguriza Nshore quickly established that FIs were unaware of the Activity. As a result, Nguriza worked to concentrate and build a number of key FI partnerships—one bank (Cogebanque), one MFI (Goshen Finance), one non-bank (BeneFactors) and the two leading industry associations (RBA and AMIR)—to establish credibility. With Nguriza Nshore’s reputation firmly cemented within the financial sector, new partnerships were initiated in late FY 2019 and they will be leveraged into delivering technical assistance in FY 2020.
There is no standard SME definition in Rwanda. FIs have their own SME definitions with no clear-cut industry standard, making conversations difficult concerning technical assistance. Understanding this lack of clarity and the confusions it causes, Nguriza Nshore encouraged MINICOM to establish an SME definition as part of the EDP under Component 3. The EDP SME definition clearly defines what a start-up is—i.e. not just a newly started business, but a business with growth potential. With the government squarely behind these new definitions, Nguriza Nshore anticipates they will become industry standards throughout the financial sector.
Banks want to rush to market. Many of the FIs Nguriza Nshore supports want to develop strategies and products quickly and get them to market. However, this approach is risky because if a strategy or product is rushed, it might not be properly designed, the systems and structures might not be in place and/or the personnel might not be adequately trained.
To address this challenge, Nguriza Nshore is pursuing a multi-pronged approach for each institution the Activity supports: Nguriza Nshore personnel explain the importance of devoting adequate time necessary to develop a strategy or product based on Nguriza Nshore’s past experiences as well as international standards on how processes are developed and implemented; Nguriza Nshore continues to set strict guidelines for internal procurement processes, which often involves educating FIs on fair and transparent competitions for services, including following USAID policies and procedures and allowing potential firms to develop high-quality proposals; and, Nguriza Nshore ensures that adequate time is built into a SOW so that FIs have a realistic expectation of when a strategy or product will be completed and ready for rollout and piloting.
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Absence of experienced Business Service Providers (BSPs). Rwandan BSPs do not have the breadth and depth of experience as other do other similar firms in neighboring countries (such as Kenya). Most Rwandan firms haven’t worked in countries outside of Rwanda and with financial institutions of varying sizes or sophistication. Requests for proposals (RFPs) the Activity received has been low and it demonstrates that Rwandan consulting firms don’t understand what Nguriza Nshore requires for its partners which is directly linked to the quality of assistance firms are able to produce.
To mitigate this challenge, Nguriza Nshore has begun to post RFPs both locally and regionally in an effort to crowd-in new BSPs that have experience working with a diverse portfolio of FIs, including banks of all sizes, deposit-taking MFIs, NGO MFIs and SACCOs. The new firms Nguriza Nshore contracts will be able to provide more specialized and higher-quality services to match the needs FIs seek. In addition, this approach will initiate growth in the existing BSP sector in Rwanda as Rwanda BSPs realize they must innovate and grow in order to compete with regional BSPs. This understanding and progression is necessary for Rwandan BSPs to keep pace with the demands of the rapidly growing and diversifying financial sector in Rwanda.
Rwandans are accustomed to receiving grants not loans. Navigating the shift from grants to loans is still a challenge in Rwanda. This reality is more pronounced in rural areas where people frequently have never worked directly with a bank.
Innovative partnerships like the one Nguriza Nshore has fostered between Goshen Finance and Zamura Feeds is important. Zamura Feeds is an excellent case study of moving farmers from receiving grants to obtaining loans. For many of Zamura Feeds’ farmers, it’s their first-time interfacing with a FI, so this experience is likely to influence their future decisions. Some farmers have begun receiving non-Zamura loans from Goshen Finance, demonstrating they are becoming increasingly sophisticated. Goshen Finance is also planning to offer trainings for farmers on savings products and financial literacy.
Even large companies in Rwanda lack capacity to respond to investor requests and demands. It’s not just small companies in Rwanda that have problems interfacing with investors. Even large companies have capacity issues (trained and experienced personnel) and lack technical expertise and they are ill-prepared to interact with sophisticated investors. For these reasons, some companies have chosen to pursue debt finance over investment.
Nguriza Nshore is mitigating this challenge by conducting additional due diligence on companies before linking them with investors. The Activity also devotes mote time preparing company CEOs and senior leadership for investor meetings and pitching their businesses.
Large banks are bureaucratic, slow moving, and last to innovative. Large banks tend to be bureaucratic and more risk-averse. Meeting CEOs and other top-level executives is difficult and often requires months of planning unlike smaller banks where meetings can be scheduled with relative ease.
Nguriza Nshore is now focused on working with small and medium-tier banks and large MFIs because they easier to work with and more likely to innovate. Once large banks witness small and medium-tier banks succeed, they will replicate their products and services—historically, the financial sector in the US follows this pattern.
High turn-over of mid-management level employees at banks. Employee retention and turnover is a barrier to building long-lasting relationships with banks.
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Nguriza Nshore has observed that CEOs, unlike mid-management level staff, tend to stay at a bank for at least 10 years. To have a long-term impact, Nguriza Nshore needs to engage CEOs directly and develop meaningful relationships with them. However, it is much easier to engage and build lasting relationships with CEOs at small and medium-tier banks.
Banks don’t easily share information. Banks consider their information proprietary. During the production of the financial baseline, banks were reluctant to share information. However, through relationship and trust building overtime, Nguriza Nshore was able to collect the information needed to complete the survey.
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EXPANDED INVESTMENT IN RWANDAN SMES
NGURIZA NSHORE’S COMPONENT 2 APPROACH
In Year 2, Nguriza Nshore made significant progress toward achieving Component 2 contractual objectives: Increase Private and Commercial Investment in SMEs. During the reporting period, Nguriza Nshore worked with numerous Rwandan SMEs throughout the five engagement stages ranging from initial meetings, co-creating technical assistance and investment readiness support, to eventually closing deals. In addition, Nguriza Nshore built partnerships with Sankalp Africa, the Angel Capital Association, and Invest Africa US in order to increase international interest in investing in Rwanda. Nguriza Nshore also added three new transaction advisors to help build its pipeline and bring SMEs to financial close. HIGHLIGHTS AND SUCCESSES
Summary of SMEs in Nguriza Nshore’s Pipeline
Nguriza Nshore works with Rwandan SMEs to attract both local and international investors in five stages, ranging from initial meetings with SMEs to eventually closing investments. The five stages include: sourcing; due diligence and selection; contracting and co-creation; investment readiness support; and, deal making. These stages are not necessarily linear and each SME moves at its own pace. For example, a SME might move between co-creation and investment readiness support as different demands from potential investors arise.
During FY 2019, 209 SMEs were sourced, 177 were selected, 20 were provided investment readiness support, and 14 moved to the deal making stage. A summary of the engagement process is outlined below.
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SME Sector* 1. Sourcing 2. 3. Co-creation 4. Investment 5.Deal Making Selection readiness Abusol Crop and Q2** animal - Company demonstrates investment production potential. Had an initial meeting and plan to follow up in FY 2020. Agasaro Food Q2 Q4 Q4 Q4 Q4 Organic processing - Ongoing into FY - Received pitch training - Pitched business to 2020 Invest Africa US investors Agroplast Manufacturing Q3 - Company demonstrates investment potential and was sourced during Q3. Nguriza Nshore will follow up during FY 2020 to determine if the SME meets selection criteria and is interested in moving forward with Nguriza Nshore. ARED Renewable Y1 Q1 Q2/Q3 Q2/Q3/Q4 Q2/Q3/Q4 energy and - Nguriza Nshore - Support in developing - Participated in technology advised ARED to investment readiness March investor trip change their materials*** - Participated in ACA strategy on how -Received pitch training - Follow up ongoing they pitch their business which made them more attractive to investors Baho Hospital Health and Q4 Q4 Q4 human services
19 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov - Discussion ongoing into FY 2020 BeneFactors Finance Y1 (FY 2018) Q1 Q1/Q2/Q3 Q1/Q2/Q3 Q1/Q2/Q3/Q4 - Received M&E - Received assistance in - Attended Sankalp assistance in improving financial and Q2/Q3/Q4 measuring social business impact model/analysis/forecast - Received loan from Bank of Africa Blessed Dairies Food Q1 Q4 Q4 production - Discussion ongoing into FY 2020 Brioche Food and Y1 (FY 2018) Q1 Q2/Q3/Q4 Q2 Q3/Q4 beverage - Nguriza Nshore - Created financial - Participated in services co-created and model Sankalp provided technical - Participated in ACA assistance in - To receive financing, marketing they need additional technical support and the Activity is considering providing it Centennial Renewable Q1 Q3 Q3 Q3/Q4 Q4 energy - Support developing - Support in investor investment readiness matching materials Chillington Manufacturing Y1 Q1 Q2/Q3 - Received pitch training Q2/Q3 - Assistance in - Attended Sankalp developing - Attended ACA communications materials for investors Q4 - Put on hold
20 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov - Support in developing investment readiness materials Deep Sky Gas Y1 Q1 Q1/Q2 - Received pitch training Q2 - Assistance in - Attended Sankalp developing communications materials for investors - Participated in March investor trip EasyHATCH Crop and Q4 Q4 Q4 Q4 Q4 animal - Ongoing into FY - Support in developing - Support in investor production 2020 investment readiness matching materials Eza Neza Crop and Q3 animal - Company demonstrates investment production potential and was sourced during Q3. Nguriza Nshore will follow up during FY 2020 to determine if the SME meets selection criteria and is interested in moving forward with Nguriza Nshore. Fresh Gate Crop and Q1 animal Demonstrates investment potential; production will re-engage them in FY 2020 Garden Fresh Crop and Q1 animal Demonstrates great investment production potential, but they weren’t interested in working with Nguriza Nshore’s initial transaction advisor (TA). Will re-engage in FY 2020 once new TAs join. GET IT Ltd. Wholesale Y1 Q1 Q2/Q3 Q2 Q2/Q3/Q4 trade in - Received M&E horticulture assistance in
21 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov measuring social - Support in developing impact investment readiness materials - Support in conducting investor due diligence Hollanda Food Y1 Q1 Q2/Q3/Q4 Q2/Q3/Q4 Q2/Q3/Q4 FairFoods production - Ongoing into FY - Support in developing - Attended Sankalp 2020 investment readiness - Participated in - Requested CFO materials March angel investor support but request - Attended SME trip this has been put on workshops on - Ongoing support in hold investment readiness investor matching - Nguriza Nshore is reviewing the SME’s accounting/finances and HFF needs to respond accordingly before it can attract investors Ikirezi Essential oil Q1 Q2 **Dead end - Received pitch training Q2 production - Assistance in - Attended Sankalp developing - In Q3, the firm communications determined it is not materials for investors interested in seeking investment and the partnership has stopped Inyenyeri Renewable Q4 Q4 energy - Pitched to Invest Africa US investors - Discussions on future support ongoing Iriba Water Water Y1 Q1 Q1/Q2 Q2/Q3 Q2/Q3/Q4 Group - Attended Sankalp
22 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov - Support in developing - Attended ACA investment readiness - Participated in materials March investor trip - Received pitch training - Support in investor - Assistance in matching ongoing developing communications materials for investors Kigali Farms Crop and Y1 Y1 Q1/Q2/Q3/Q4 Q1/Q2/Q3/Q4 Q2/Q3/Q4 animal - Discussions have - Attended Sankalp - Attended Sankalp production been ongoing - Support in conducting - Pitched to Invest throughout FY business assessment and Africa US 2019; will submit developing financial solidified concept model note in FY 2020 - Pitched at Invest Africa US
Kumwe Food Q1 Q3 Q3 Q3/Q4 Q3/Q4 Solutions processing - Support in - Used business - Using investment (Kumwe and conducting business assessment and financial readiness materials Harvest and Transport assessment and model to create pitch from technical Kumwe and logistics developing financial deck and teaser assistance to connect Freight) model with investors and source debt Legacy Clinics Health and Q1 Q1 Q2 Q2/Q3 Q2/Q3/Q4 human - Nguriza Nshore - Attended Sankalp services provided investment - Nguriza Nshore structure advice (split helped facilitate between debt and investor meetings equity) which helped - Ongoing meetings Legacy Clinics become with commercial bank more attractive to investors - Received pitch training
23 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Masaka Food Q1 Q2 Q3 Q3/Q4 Q3/Q4 Creamery production - Support in conducting - Nguriza Nshore business assessment and helped to facilitate developing financial conversations with model investors - Produced growth scenarios Movement Transport Q2 Supply and and logistics - SME recommended by PSDAG. Had Services Ltd. an initial meeting but requires follow up in FY 2020. MUNYAXECO Renewable Q4 Q4 Q4 Q4 Q4 energy - Discussions are on - Received pitch training - Pitched to Invest going and help in developing a Africa US investors pitch deck Norelga Crop and Q1 Macadamia animal - Has investment potential Rwanda Ltd production - Had initial meeting; will contact in FY 2020 and re-engage
North Harvest Retail sale Q2 Ltd. (Park and agricultural Had an initial meeting but it was not Pick) products selected as it does not meet project criteria as a start-up. Pharmacy Health and Q1 Conseil human Q4 services SGES/ATT Transport Q4 Q4 and logistics AC Group Technology Q3 Q4 Q4 Q4 Q4 (Tap & Go) - Ongoing - Received pitch training - Pitched to Invest discussions Africa US investors Water Access Water Q3 Q4 Q4 Q4 Q4 Rwanda
24 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov - Ongoing - Supported in - Pitched to Invest discussions conducting business Africa US investors analysis - They were approached to apply for a grant and Nguriza Nshore is helping them structure it
Zamura Feeds Crop and Q1 Q2 Q1 animal - Ongoing production discussions - Built a relationship with Zamura Feeds under Component 1 and now they are now interested in investment and have requested Nguriza Nshore for support
* These sector definitions come from the UN International Standard Industrial Classification of All Economic Activities (ISIC) which is the standard classification of sectors used in Rwanda **Q1, Q2, Q3, Q4 refer to the first, second, third, and fourth quarter of FY 2019 respectively and Y3 refers to FY 2020
*** Investment readiness materials include business assessments and financial models, pitch decks, and investment memorandums.
25 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Stage 1 - Sourcing
Throughout FY 2019, Nguriza Nshore sourced 209 SMEs through a variety of informal and formal channels. Informal sourcing included word of mouth referrals and office walk-ins. Nguriza Nshore also sourced SMEs through formal avenues such as: conducting road shows; conducting SME workshops; attending trade shows and networking events to link investors with SMEs; releasing expressions of interest (EOIs) or RFPs; connecting with SMEs through the Activity website, email and/or social media; coordinating with other development projects; accepting referrals (i.e. companies the Activity supports, other USAID projects, investors, etc.); and, attending miscellaneous events.
A summary of Nguriza Nshore’s sourcing methods and outcomes during FY 2019 is provided below:
Road shows. Nguriza Nshore conducted two road shows in FY 2019 to network with potential SMEs and raise awareness of the Activity. During the second quarter of FY 2019 Nguriza Nshore conducted a road show with SMEs operating in the Special Economic Zone (SEZ). The objective of this initiative included: identifying and establishing contacts with SMEs (factories and manufacturing companies); sharing information about Nguriza Nshore and the Activity’s role facilitating access to finance and investment opportunities; and, understanding policy issues affecting the business enabling environment within the SEZ. Some SMEs operating in the SEZ are currently in the sourcing stage. Nguriza Nshore intends to conduct further follow up in FY 2020 to determine if any of these SMEs are ready to move into the selection stage, particularly as the Activity has three new TAs capable of providing support.
In the third quarter of FY 2019, Nguriza Nshore also conducted a road show in Eastern Province. The Activity interacted with three SMEs: Savannah Dairy, a dairy production business; Fruits Drier, a dried fruit processing business; and, Imigongo Art Center/Café, a social business focused on creating imigongo, traditional Rwandan art. Savannah Dairy was identified as the most promising investment opportunity and Nguriza Nshore followed up with the company during the fourth quarter of FY 2019 to determine how the Activity can support the business become investment ready.
SME workshops. During FY 2019, Nguriza Nshore hosted two SME workshops. The first workshop took place during the first quarter of FY 2019 and was titled: “Alternative Sources of Finance.” The interactive event featured Huseyin Demirhisar, angel investor and seasoned investment at expert at BiD Network. Over 200 entrepreneurs and changemakers expressed interest in the workshop and approximately 90 Rwandan entrepreneurs attended the event. The overall objective of the workshop was for SMEs to gain exposure to a variety of financing options and to understand how to position their companies to access investment opportunities. Participants learned about the investment landscape in Rwanda, including traditional investment options and non- traditional financiers. Nguriza Nshore also described the benefits of working with the Activity. The
26 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov U.S. Ambassador to Rwanda, Peter Vrooman, also attended the post-workshop reception where he interacted with entrepreneurs and discussed their business ideas and challenges.
During the second quarter of FY 2019, Nguriza Nshore held a second investment readiness workshop. The workshop highlighted the angel investment landscape and how deals are structured in that asset class. The workshop provided the opportunity to explore angel Entrepreneurs ask questions about alternative sources investment in more depth, highlighting different of finance during SME workshop investment scenarios. 17 SMEs attended.
The workshop also resulted in a well prepared one-page summary of the company’s three to five- year business plan with measurable outputs, updated financial modeling and formulation of an investment plan with three-year projections.
In both workshops, Nguriza Nshore met with new SMEs, although many SMEs attending were part of Nguriza Nshore’s pipeline. Learning from this experience, Nguriza Nshore intends to create targeted SME workshops by sector and region to more efficiently use the SME workshop platform to crowd-in new SMEs to the Activity.
Attending networking events. Nguriza Nshore also attended a variety of workshops and networking events to connect with potential SMEs and heighten awareness of the Activity. A summary of the most notable events attended is outlined below:
Young Founder’s Conference. The Young Founder’s Conference was organized by Westerwelle during the third quarter of FY 2019 and brought together 15 start-ups and SMEs from East Africa, including five from Rwanda. Nguriza Nshore gave presentations on different types of financing options available to businesses at various growth stages as well as an overview of the finance ecosystem in Rwanda. Only one company, a Ugandan business, had experience raising investment. Rwandan companies did not have experience raising investment and it presented partnership potential with Nguriza Nshore.
ICT Chamber Workshop. Of the 200 companies the ICT Chamber supports, 75 companies, ranging from start-ups to well-established SMEs, require investment readiness support. PricewaterhouseCoopers provides investment training to 15 companies but there are still many businesses that could benefit from investment readiness training. Nguriza Nshore attended a workshop organized by the ICT Chamber during the third quarter of FY 2019 to network with 20 of these companies and many are innovating within the agribusiness and agriculture sectors using technology.
RYAF Engaging Youth in Agripreneurship Conference. Nguriza Nshore attended the Rwanda Youth in Agribusiness Forum (RYAF) Youth in Agripreneurship Conference to network with youth-led agribusinesses. 70 youth businesses attended. Most were start-ups or microenterprises and thus not eligible to work with Nguriza Nshore.
USAID PSDAG Close-Out Event. Nguriza Nshore attended the USAID PSDAG close-out event to network with relevant development partners as well as SMEs supported by PSDAG. A few promising SMEs were identified, such as Hollanda FairFoods, Kigali Farms, and Masaka Creamery which Nguriza
27 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Nshore has worked with during FY 2019. Other SMEs were heavily focused on agri-production and not eligible for Nguriza Nshore support, although Nguriza Nshore linked them with Hinga Weze.
Releasing EOIs and RFPs. Nguriza Nshore will facilitate additional investment through competitive sourcing. During FY 2019, Nguriza Nshore released an EOI to source new Transaction Advisors (TAs) and Business Services Providers (BSPs), with the goal of increasing the number of SMEs in the Activity’s pipeline.
After an intensive procurement process, Nguriza Nshore selected three new TAs/BSPs with large and diverse private capital networks that include domestic, regional, and international angel investors, venture capitalists, private equity funds, high-net worth individuals, family foundations, social impact investors and development finance institutions. The firms selected were Open Capital Advisors, Market Intelligence Africa and NISK Capital.
Similar to the support the Activity currently provides to SMEs, the new TAs/BSPs will offer SME identification through financial close, including assistance with management/strategic consulting, business planning, financial modeling, investment memorandum/pitch deck preparation, etc.
SMEs contacted Nguriza Nshore via the Activity website, email, and/or social media. Throughout FY 2019, Nguriza Nshore has been active on social media, primarily Twitter and Facebook, to increase the level of visibility of the Activity. Nguriza Nshore also developed an Activity website where SMEs can apply for support. Throughout the year, many SMEs reached out to Nguriza Nshore on the Activity’s digital platforms.
Referrals. During the third quarter of FY 2019, Nguriza Nshore received a referral from potential SMEs through the HortInvest Activity. For instance, Nguriza Nshore followed up with one SME involved in food processing, Agasaro Organic. The company requires equity to match the grant provided by HortInvest. Agasaro Organic moved to the next stage of Nguriza Nshore support (outlined in Table 6). Nguriza Nshore also received SME referrals from PSDAG.
Walk-ins. Several SMEs walked in to Nguriza Nshore’s office throughout FY 2019. Five promising SMEs were identified including a poultry agribusiness, a grain supplier, a food processing company, a technology company working within the transport sector, a logistics company, a pharmaceutical company and a pharmaceutical distributing company.
Stage 2 – Selection
During FY 2019, Nguriza Nshore solidified its approach to screening and selecting SMEs eligible for further Activity assistance. After connecting with an SME through a sourcing method, Nguriza Nshore conducted pre-screening meetings during which Nguriza Nshore personnel determined if the SME met the Activity’s criteria. Key selection criteria include the following:
• The SME must be registered to operate in Rwanda
28 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov • Linkage to agribusiness – the SME must link, directly or indirectly, to agriculture and value chains • Stage of business growth – the SME must have an established client base and generate revenue. Ideally the SME should also have a business model and financial projections but the majority do not • The SME must present two years of financial statements, preferably audited • The expected outcomes of the SME must align with Nguriza Nshore targets of increased annual sales, job creation, and business growth
After an initial scan of a potential SME’s eligibility, Nguriza Nshore organized meetings with the SME to determine its needs and whether they are interested in the support the Activity offers. In cases where an SME is close to meeting the Activity’s criteria but has some remaining weaknesses, the Activity offered guidance on what the SME must do to meet the criteria. If they cannot, Nguriza Nshore refers them to another partner with the intention that the SME might be ready to join the pipeline after a couple of years.
During FY 2019, Nguriza Nshore selected 177 SMEs that met Activity selection criteria and demonstrated investment potential to continue receiving project support. These SMEs moved into the third stage of contracting and co-creation.
Stage 3 – Contracting and Co-creation
Nguriza Nshore worked with a number of SMEs during FY 2019 to co-create technical assistance and investment advisory services necessary to receive investment.
A summary of the types of assistance offered to different SME partners is listed below:
Co-creation with ARED. Africa Renewable Energy Distributor (ARED) is a company that uses a franchise model to provide digital services for mobile users via solar powered digital kiosks in East Africa. Nguriza Nshore provided investment readiness support to ARED throughout FY 2019 by helping the company develop investment readiness materials such as pitching documents as well as pitch training and coaching. In the third quarter of FY 2019, ARED was selected as one of four SMEs supported by Nguriza Nshore to attend the Angel Capital Association (ACA) Summit in Chicago. The CEO of ARED, Henri Nyakarundi, pitched his business to an audience of 700 plus investors and he was awarded ‘Best Investment Potential’ and ‘Best Pitch.’ After hearing from investors at ACA, Nguriza Nshore also helped ARED shift its business strategy to position itself as a technology- focused company rather than a renewable energy business, which has been pivotal in helping ARED gain further traction with investors. ARED is now close to securing private equity investment and the company was featured during the fourth quarter of FY 2019 on CNN, highlighting the company’s solar kiosk model and successful growth potential.
29 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Co-creation with BeneFactors. As described under Component 1, Nguriza Nshore provided BeneFactors with a $100,000 grant to grow in its invoice financing model. The grant allowed BeneFactors to build a proof of concept necessary to seek additional investment. Redacted.
In addition, BeneFactors has been queried by social impact investors for possible investment; however, they were unable to provide grassroots information sought by those funds. Nguriza partnered with BeneFactors to design and pilot a M&E system to capture information important to social impact investors. With that information, the company expects to access funding through social impact channels where previously none was available.
Co-creation with Brioche. Nguriza Nshore provided technical assistance to Brioche in two key areas during FY 2019:
Proof of Concept. A business assessment conducted by Nguriza Nshore revealed that Brioche has growth potential, particularly through their new On the Go model. However, potential investors require a Proof of Concept (PoC) on Brioche’s On the Go model before they can invest. The PoC is centered on growth into Kenya, although Brioche’s operations in Kenya directly benefit agriculture value chains in Rwanda since their sourcing and production takes place in Rwanda.
RFP for Marketing Specialist. The second key recommendation of the business assessment for Brioche called for hiring a Marketing Specialist to increase Brioche’s sales. Brioche needed to increase its sales and profitability to gain investor confidence. With the marketing resource in place, the CEO and COO’s had additional time to focus on other critical business functions—improving the company’s overall performance. The RFP was released and a Marketing Specialist was hired in the second quarter of FY 2019.
Co-creation with GET IT. Nguriza Nshore also co-created M&E assistance with GET IT to help the SME capture information potential social impact investors require to inform investment decisions. GET IT recently began an aggregated farming activity on 20-hectares with 201 farmers in Rulindo district to produce ginger and Nguriza Nshore assisted them in designing an M&E system that accurately captures social impact. Redacted. The financing underpinned their ginger sales, locked- in on a forward contract with a South African buyer. Get-It’s ginger success led to a new partnership with Griffith Foods (Illinois) and the Rainforest Foundation (New York) for a second 20-hectare plot in red chilis with plans to expand to 800 hectares employing 10,000 farmers. The Rainforest Foundation will certify Fairtrade and organic; Griffith will buy all the chilis produced. Nguriza Nshore plans to support three additional SMEs with M&E building on this successful innovation.
In addition to receiving M&E support, Nguriza Nshore also helped GET IT develop investment readiness materials such as a business assessment and financial model, an investment memorandum, and pitch deck. Redacted.
Co-creation with Masaka Creamery. Masaka Creamery demonstrated investment potential and Nguriza Nshore released a RFP in May for a BSP specialized in dairy. The consultant developed a business assessment and financial model; he also produced financing scenarios to help Masaka better understand its options.
30 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Stage 4 – Investment Readiness
In order to prepare SMEs to interact with investors, Nguriza Nshore offered investment readiness support to 20 SMEs in the following areas. These 20 firms all have MoUs and/or contracts with a Nguriza Nshore transaction advisory partner. The MoUs with Nguriza Nshore last for the duration of the Activity and the contracts with the transaction advisory partners extend multiple years and last until the advisory partner fulfills the terms of the contract in terms of investment deals.
Financial models. Nguriza Nshore created financial models for 14 SMEs, preparing them to meet with investors.
Investment Memorandums (IMs). An investment memorandum is a legal document that explains the company’s business plan in-depth and it is presented to an investor after a company has pitched to them. Nguriza Nshore developed IMs for 16 SMEs during FY 2019. Rwandan SMEs who attend ACA 2019 Summit together Pitch decks. A pitch deck is a simplified and visually with Nguriza Nshore team appealing version of the IM that can be used by SMEs when pitching to potential investors. Pitch decks were developed for 20 SMEs during FY 2019.
Pitch trainings. During FY 2019, 20 SMEs received pitch training in preparation for pitching at events such as Sankalp, ACA, the March angel investor trip and the Invest Africa US visit.
Stage 5 - Deal making and expanding investor network pool
Deal making and expanding the investor network involves formalizing relationships with investors that have been built in previous quarters as well as continuing to expand the investor network pool through, for example, attending events like Sankalp and ACA. Progress made toward closing deals with 14 SMEs during FY 2019 is described below:
Sankalp 2019 Summit. During the second quarter of FY 2019, Nguriza Nshore sponsored nine Rwandan SMEs to the Sankalp Africa Summit 2019, a large event bringing together nearly 1,000 social entrepreneurs and impact investors. This was the first time a cohort of Rwandan SMEs attended this important regional investment summit. The SMEs pitched their businesses to potential
31 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov investors, attended informational sessions on a variety of topics from valuating their businesses to understanding different types of investments and they networked with other SMEs in the region.
Angel Capital Association (ACA) 2019 Summit. Over FY 2019, Nguriza Nshore fostered a strong relationship with the Angel Capital Association (ACA), the largest network of angel investors in the world, with over 14,000 investors in its network. Through this relationship, Nguriza Nshore purchased a gold pass to showcase four Rwandan businesses at ACA 2019 Summit in April, a high- profile event that brought together over 700 angel investors. The four Rwandan SMEs attending included ARED, Brioche, Chillington and Iriba. In addition, three people from BiD Network and four Nguriza Nshore Activity personnel participated.
The businesses gained important experience from the event, receiving exposure to American businesses and they developed a better understanding of American investors. The predominantly American audience was impressed by the Rwandan SME’s professionalism. Three of the Rwandan entrepreneurs received Top 3 Awards based on live voting during the pitch sessions. Some of the entrepreneurs built lasting relationships with investors and had ongoing conversations post summit.
Nguriza Nshore built new connections with investors, although of the 700 investors at the summit, only 20 had Africa experience. As a result, Nguriza Nshore will concentrate on educating ACA membership about Africa and Rwanda in particular.
The ACA Summit was considered an overall success, a crucial staging point and launch site for partnership with USAID and Nguriza Nshore. The ACA and Nguriza Nshore agreed that, as part of a long-term agenda, both parties would work together to develop a communication’s strategy that would be housed on the ACA’s website. In addition, two board members assigned as Nguriza Nshore’s ambassadors plan to visit Rwanda in FY 2020 to better understand the local business context, Pitch event during March investor trip political economy and meet with Rwandan SMEs so that they can communicate what they learn to their colleagues at the ACA Summit 2020.
March investor trip to Rwanda. During the second quarter of FY 2019, Nguriza Nshore organized a seven-day investor trip in which four European angel investors explored local business opportunities. The trip had multiple events including a workshop on angel investment, a deal making event and site visits to five Rwandan SMEs.
The Activity prepared six SMEs with the angel investors including ARED, BeneFactors, Chillington, GET IT, Hollanda FairFoods, and Iriba. The SMEs were provided with pitch training and coaching before the site visits. They were also invited to the deal making event and a networking workshop where SMEs had the opportunity to pitch their businesses.
Following the deal making event and site visits, each investor shared a list of companies they wanted to follow up with. They also indicated the additional information they require to better understand the business, its growth plans and investment opportunities. Additional information was shared in the form of pitch decks, investment memorandums and financial models. Formal introductions between investors and entrepreneurs were made and initial conversations, facilitated by Bid Network, are on-going. Match making is still in process with companies or sectors investors have expressed interest in.
32 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Invest Africa US Women’s Invest Mission to Rwanda. From September 9 – 12, Invest Africa US brought a delegation of 10 executive-level women investors to Rwanda as a part of its inaugural Women Investors Mission Initiative, a platform for top women decision makers from the international investment community who have an interest in Africa. The delegation was led by Cherie Blair, an expert on Africa, and Founder of the Cherie Blair Foundation. Nguriza Nshore partnered with the mission to co- Rwandan SME pitches to Women’s Invest Mission investors at Invest Africa US pitch event host a business pitch event in which five of Nguriza Nshore’s SMEs pitched their businesses to the delegation. The delegation expressed positive feedback on the session and the businesses.
In addition, Nguriza Nshore joined the delegation for a reception with the US Ambassador to Rwanda, Peter Vrooman. Cherie Blair was the guest speaker and she iterated the importance of having the inaugural delegation of women investors come to Rwanda. Nguriza Nshore SMEs, private sector leaders and government representatives attended the event. LESSONS LEARNED AND OPPORTUNITIES IDENTIFIED
Investment process is lengthy. The time from an initial meeting with an SME to an investment deal close is a lengthy process, taking an average nine months to one year. However, for Rwanda, most SMEs are new to private equity and therefore must go through numerous reforms/restructuring to become investment ready, a major lesson Nguriza Nshore has learned during FY 2019. The conversation rate from sourcing to selection is 30% and then from selection to a deal close is 10%. These numbers have informed how Nguriza Nshore will approach its work with SMEs in FY 2020 by sourcing higher quality SMEs and expanding the Activity’s TA and BSP network to expand the pipeline of SMEs.
Focusing on SMEs that are value oriented. Using a market systems lens, Nguriza Nshore focuses on value-oriented SMEs, rather than profit oriented businesses in order to recognize major outcomes for the Activity and for Rwanda. With BeneFactors, Nguriza Nshore recognizes, that as the company receives more financing/investment, it empowers other SMEs through its factoring. BeneFactors efficiently deploys its capital which Nguriza Nshore seeks to replicate with other SMEs.
Even successful and growing SMEs have challenges. Successful and growing SMEs must overcome challenges before they can become investment ready and Nguriza Nshore has played an important role in assisting these companies. For example, the M&E support Nguriza Nshore provided to BeneFactors and GET IT has helped both SMEs access investment they would have otherwise been unable to receive.
Closely maintain the pipeline list. Nguriza Nshore also learned that it needs to closely monitor the SME pipeline list to ensure that partnerships with SMEs do not stagnate due to a lack of follow up. In FY 2020, Nguriza Nshore will continue regularly updating the pipeline list, especially as the Activity begins to engage different TAs and BSPs.
SMEs are hesitant about alternative financing. SMEs are hesitant about alternative financing such as private equity. They are predominantly used to grants and bank loans. As SMEs pivot toward private capital, many businesses must restructure and improve governance. Nguriza Nshore must
33 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov help SMEs early in the process to work through governance issues before investors are matched with companies.
Expanding Nguriza Nshore’s pipeline by bringing on new transaction and business advisors. In Rwanda, there is a dearth of experienced transaction and business advisors specialized in identifying investible SMEs and that have the proven experience and ability to assist SMEs to become investment ready and to secure private capital. Nguriza Nshore will contribute to creating a broad and diverse transaction advisory sector in Rwanda that will survive long after the Activity is completed by crowding-in high-quality advisors during the life of the Activity.
SMEs have different preferences when it comes to working with transaction and business advisors. SMEs have different needs and preferences which dictate the type of advisors best suited to work with them. Therefore, it is important to have a diverse range of advisors active in Rwanda and Nguriza Nshore began working to crowd-in experienced advisors in FY 2019.
Improving how the Activity prepares RFPs. As Nguriza Nshore continues to learn and adapt, the Activity has moved from responding to needs urgently, which meant doing procurement via sole sourcing, to creating time to source competitively. Nguriza Nshore began competitive sourcing throughout the third quarter of FY 2019 and it’s another means of increasing transparency and visibility of the Activity.
Each SME needs tailored solutions. Nguriza Nshore’s assistance is different for every SME and must be customized for each SME. For example, the impact measurement assistance provided to GET IT is completely different than what was provided to BeneFactors. This process is not standardized and therefore more time-intensive approach and it produces effective long-term results.
Investors have specific risk appetites and sector interests. As Nguriza Nshore expands the number and type of investors it interacts with, it becomes increasingly clear that investors have different priorities and thus need to be approached in a targeted manner. SMEs recognize this fact as they engage with different investors, particularly at large conferences like ACA. Once SMEs better understand this reality, they can target their pitches and materials accordingly and produce better investment results. CHALLENGES AND MITIGATING MEASURES
Low percentage of SMEs that move from sourcing to deal making. A low percentage of SMEs move from sourcing to deal making. Nguriza Nshore noted the number of SMEs not moving forward to investment close is much greater than expected.
Addressing this problem, Nguriza Nshore sourced additional TAs to reach a greater number and variety of SMEs, many close to investment readiness, helping Nguriza Nshore close transactions more quickly as the Activity moves into FY 2020.
Governance and book keeping issues delay SMEs from moving into the deal making stage. Many SMEs struggle with fundamental business issues like governance and basic book keeping. Without these basic structures and skills in place, it’s difficult to prepare SMEs for investment and Nguriza Nshore doesn’t have the time to curate large numbers of SMEs lacking fundamental skills. In FY 2020, the Activity will seek to overcome this obstacle through potential partnership with the RDB. RDB expressed interest working with companies fitting this profile.
34 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Private equity is reluctant to invest in small companies, especially in Africa. Convincing investors to invest in a company that is small, particularly in Africa, remains a challenge. The statistics underscores most private capital invested into Africa is concentrated in Kenya and South Africa with Rwanda receiving the least amount of investment in East Africa.
Nguriza Nshore will overcome this challenge by showcasing Rwandan companies at events such as Sankalp and ACA, promoting opportunities by sponsoring investor exchanges to Rwanda and though social media campaigns with partners.
Low capacity and diverse needs of SMEs. SMEs in Rwanda are accustomed to receiving grants given long-standing legacy issues post genocide. As a result, SMEs expect unconditional grants or subsidized, non-commercial debt. These expectations are changing as the government and donors move away from grants to commercial approaches. As a result, many SMEs, including the majority in Nguriza Nshore’s pipeline, lack the skills necessary to operate a commercial enterprise and they require significant technical assistance to become investment ready. The Activity must customize assistance and source qualified experts to support it pipeline companies.
SME workshops have not translated to an increased pipeline. Nguriza Nshore has conducted several SME workshops over the course of FY 2019 but it has not sourced a substantial number of SMEs through this channel. Nguriza Nshore will change its approach for future workshops. The Activity intends to conduct focus group discussions in the first quarter of FY 2020 to better understand what SMEs need to learn and what questions they have based on their business stage (i.e. a start-up versus an established SME.). Nguriza Nshore will also consider offering workshops with topics targeted at SMEs not ready to join the Activity pipeline in areas such as creating and maintaining compliant financial statements.
SMEs lack impact data. SMEs looking for impact investment could not source capital due to a lack of data on their social impact. Besides offering anecdotes, they could not answer questions from impact investors and move discussions forward.
Nguriza Nshore is mitigating this challenge by designing targeted impact measurement systems for SMEs. Nguriza Nshore has realized results from this approach. For example, the Activity developed a logic model for GET IT which they inserted into their pitch deck targeting impact investors that garnered increased interest in their business. Nguriza Nshore is continuing similar support to GET IT and other SMEs.
Scalability of SMEs. Scalability of Rwandan SMEs is a primary concern for most investors. Nguriza Nshore experienced this issue since attending the Sankalp Africa Summit and was it was again reiterated during the third quarter when interacting with investors at ACA.
Nguriza Nshore will screen new SMEs by ensuring that their business model demonstrates scalability. Brioche is an excellent example of an SME that has potential to scale since its production center is in Kigali but it has an established consumer base in Nairobi which is a much larger market. As its business grows, it benefits the Rwandan economy and agribusiness sector since it sources Rwandan-made agricultural products, yet Brioche can easily demonstrate to investors that their model is scalable. Using this approach, Nguriza Nshore will work with other SMEs in Rwanda to shift their mindset toward business scalability.
35 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov STRENGTHENING THE ENABLING ENVIRONMENT
NGURIZA NSHORE’S COMPONENT 3 APPROACH
In Year 2, Nguriza Nshore made significant progress in Component 3: Strengthen the Enabling Environment to Create the Conditions for Off-Farm SMEs to Increase Their Business Performance and Profitability. During the reporting year Nguriza Nshore built a strong relationship with influential actors in the entrepreneurship ecosystem including MINICOM, conducted a country-wide survey of the needs and gaps in the entrepreneurship ecosystem in Rwanda, created a policy to address the gaps identified in the ecosystem – namely the Entrepreneurship Development Policy, supported MINICOM to engage constituents and encourage ownership of the policy at all levels of Rwandan society, and supported MINICOM to have a sustainability mindset in planning for policy implementation. The EDP moved through multiple levels of approval and it is anticipated the government will approve the policy during the first quarter of FY 2020. During the reporting period, Nguriza Nshore began work on a few key policy action items such as the Private Equity Law.
Nguriza Nshore Component 3 Theory of Change
Current Market System Context
• The political system, in terms of the entrepreneurial ecosystem, is showing real intent to improve the enabling environment, but at the same time it is organized around a highly concentrated power node (the government) which is generally not participatory and exclusive of citizen involvement in policy development, enforcement and oversight, which allows for decisive action from the top, but is also results in increased fragility and a propensity to drive narrowly defined, top-down decision making, idea generation, and policy development processes. It often involves external consultants unfamiliar with the Rwandan context and creates a lack of government ownership during implementation. (As an outlier, the development of the EDP policy process is more participative than ever before.) • As a result, there are both specific technical fixes and systemic challenges that need to be addressed for inclusive growth to be properly supported/catalyzed over a long period of time by focusing on inclusive policy development, implementation, enforcement and oversight—and government ownership and accountability • By assessing the policy development process via its functional cycle (policy development → policy translation into laws → public education → implementation of laws → monitoring), underlying systemic limitations and biases are clarified, especially in the context of how they are unlikely to support inclusive growth since inclusive growth directly impacts the lives, livelihoods and resiliency from those most excluded from the comprehensive process: − Policy development is not driven by objective and evidence-driven participatory development processes. The policy development process is top-down and expert-driven where a single expert or small group of experts, often paid by a donor, write idealized policies. The result is that policies do not align with the current political economy or cultural and economic contexts making most policies ineffective/unable to be implemented. − Policy translation into laws, regulations, and enforcement protocols is not effectively transparent, professional, and open to influence/counterbalance (i.e. especially if the translation seems to be hijacked) from stakeholders, often the government itself. The result is that laws, regulations, and enforcement protocols can be influenced in a way that may result in a mis-alignment between policy objectives and the capacity/inbuilt incentives of the enforcement/implementing agency to operationalize the policy due to a lack of ownership and accountability to the people the policy is designed to impact.
36 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov − Implementation of laws, regulations and enforcement practices rarely align with policy objectives. Since the expert-crafted policies are not effectively aligned with the local context and what citizens need and expect of government, it is highly unlikely that the objectives of the policy will be achieved. − Monitoring, if conducted, is primarily conducted as an in-house activity of the government in Kigali. While government is trying to conduct effective monitoring, they are unable to fully understand and capture the various perspectives of all the stakeholders affected by a policy because reports are prepared outside Kigali and submitted to Kigali without the participation of citizens. The result is that they are unintentionally devaluing or actively limiting effective monitoring, as well as not gathering enough insights/perspectives to guide effective adaptation/policy improvements.
Future Political System Change • The political system needs to become more constituent-oriented, which means that the policy development the system to adapt effectively over time based on local realities. Specific changes in the functions should include: − Policy development function needs to reinforce drivers/incentives that make the function objective-oriented by seeking feedback from key constituencies where the government is directly involved in the process without outsourced support, guided by evidence, and actively engages diverse stakeholders. − Policy translation function needs to translate policies into laws and regulations in a transparent, professional, and open manner, not driven in a top-down process from Kigali. The process needs to be open to influence/counterbalance (i.e. especially if the translation seems to be hijacked) to ensure vested interests align with the translation process and the needs of populations policies seek to support − Public education: More inclusive systems have standard protocols (regular constituent town halls, open discussion forums, etc.) to inform and/or provide access to all relevant government work products, including related policies, supporting evidence and certainly laws, regulations and enforcement practices. − Implementation function needs to invest in understanding and aligning incentives so that enforcement practices result in outcomes that align as closely as possible with the policy objectives. Inclusive systems also engage/empower stakeholders (constituents, citizens) during this process that can support and reinforce fair and transparent application/enforcement practices. − Monitoring function needs to be performed by a diverse set of stakeholders. Market, civil society, media, research firms, etc. all need to engage in and be empowered to observe, track, and assess the alignment/effectiveness of policy implementation/enforcement. Within government there should be counterbalancing structures and an independent feedback/complaint process that is accessible (already started in several areas, such as the consumer protection agency). This overall monitoring process needs to include a strong advocacy capacity primarily delivered by stakeholders as it is often during poor and misguided/corrupt implementation/enforcement that market actors (citizens, businesses, NGOs, etc.) feel the most pain. It is critical that this function smoothly leads back into the participatory policy development function. − There needs to be a set of support services, including civil society, that is funded locally, and constituent driven, such as research firms and public relations firms and media.
HIGHLIGHTS AND SUCCESSES
Strengthening Rwanda’s Entrepreneurship Ecosystem
During FY 2020, Nguriza Nshore strengthened Rwanda’s entrepreneurship ecosystem as outlined below:
Strong relationship built with MINICOM. During FY 2019, Nguriza Nshore fostered a strong relationship with MINICOM. It was a year-long process to build credibility with the Ministry but the relationship proved to be invaluable in all activities Nguriza Nshore has undertaken. The relationship allowed Nguriza Nshore to support the formulation of the EDP, outlined in greater detail below. In
37 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov addition, Nguriza Nshore’s solid relationship with MINICOM has created opportunities for the Activity to partner with other government ministries in FY 2020, such as in development of a Private Equity law, outlined below.
Worked with MINICOM to complete country-wide survey of the Rwandan entrepreneurship ecosystem. During the first quarter of FY 2019, Nguriza Nshore undertook an extensive survey of entrepreneurship ecosystem in all five provinces in Rwanda, consulting ecosystem actors—citizens, NGOs, businesses, development partners and the Government of Rwanda. The survey collected information necessary to inform the EDP with a new focus on: supporting entrepreneurship, innovation and enterprise growth at all stages of the enterprise growth lifecycle, from startups to existing MSMEs, unlocking barriers to entrepreneurship and enterprise growth.
During the mapping phase, Nguriza Nshore met with 33 key stakeholders from the government, private sector, and donor community to identify challenges and opportunities affecting the business enabling environment as well as to better understand the gaps of the previously expired 2010 SME Development Policy. Nguriza Nshore held extensive meetings with MINICOM to understand the government priorities and expectations in developing the EDP as well as to establish a framework in how Nguriza Nshore would support MINICOM in developing the policy. Nguriza Nshore met with donors and donor-funded projects, individual consultants and technical experts, business incubators, business accelerators, business service providers, consulting firms, investor transaction advisory firms, co-working spaces, hubs, networking platforms, private sector and industry-specific associations, banks, MFIs, venture capitalists, and investment funds, relevant government agencies including: MINICOM, Ministry of Finance and Economic Planning (MINICOFIN), Ministry of Education (MINEDUC), Ministry of Public Service and Labor (MIFOTRA), Ministry of Agriculture and Animal Resources (MINAGRI), Ministry of Local Government (MINALOC), National Industrial Research and Development Agency (NIRDA),RSB, Rwanda Polytechnic, Ministry of Youth (MINIYOUTH), MIGEPROF, and University of Rwanda (College of Business Economics). Engaging this wide variety of stakeholders presented Nguriza Nshore with a broad picture of the current entrepreneurship ecosystem. It also helped the Activity understand initial recommendations and suggestions for what should be included in the EDP. From this survey, Nguriza Nshore developed an inception report.
During the data collection phase, Nguriza Nshore and MINICOM traveled to all five provinces and across 20 districts to meet with 313 diverse stakeholders to better understand the achievements and challenges from the previous SME Policy, the prioritization of the challenges affecting startups and business growth in Rwanda, and potential recommendations for the EDP. Stakeholders consulted included local government officials (mayors, vice mayors, business development managers, cooperative managers) as well as the Office of the Governors. These interactions helped Nguriza Nshore better understand the challenges affecting business growth at the district level, gather policy recommendations reflecting the local business environment and establish a database of local district officials and SMEs.
In addition, Nguriza Nshore met with MSME representatives in various sectors including agriculture, trading, tourism, hotel/restaurant/hospitality, cooperatives and SACCOs, cross-border cooperatives and traders and representatives of women and youth entrepreneurs. Critical insight was also gained including the views, challenges, opportunities, and recommendations this group of actors presented for the EDP, a better understanding from the people’s perspective of the challenges in implementing the previous SME policy as well as the gaps in the previous SME policy.
38 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov In policy development in Rwanda, it is rare that this extensive amount of grassroots data is collected from such a wide variety of actors which has made the EDP development unique. Various stakeholders indicated that they have ownership over the policy which is something they’ve never experienced. In addition, this is one of the first times MINICOM was involved in policy development from the data collection stage rather than having an external consultant do their own data collection and present the information gathered to MINICOM – this was a chance for MINICOM to hear, firsthand, the gaps and challenges completely unfiltered from the grassroots. This turned out to be indispensable later when creating the policy but also in helping MINICOM itself to better understand the current challenges and gaps in the entrepreneurship ecosystem. Additionally, the knowledge gained through this in-depth stakeholder engagement process has laid the foundation for all other work Nguriza Nshore has done and will do in creating a stronger business enabling environment.
“The EDP development process was more engaging and inclusive; its development process was informed by the views and wishes from the private sector who are actually the main beneficiaries of the policy. Key private sector segments namely: people with disability, women and youth entrepreneurs were given special attention during this process. This has resulted into quality work that has been appreciated by all stakeholders during different validations workshops. We think that we can recommend duplicating the same participatory process in the development of other future policies and strategies” – Jonas Munyurangabo, Director General of Planning and M&E, Ministry of Trade and Industry
Partnered with MINICOM to develop comprehensive policy to address gaps identified in current entrepreneurship ecosystem. After gaining a wide-ranging understanding of the current gaps and challenges in the entrepreneurship ecosystem, Nguriza Nshore partnered with MINICOM to develop a comprehensive policy in the form of the EDP to address these challenges.
The EDP was drafted and formulated during the second quarter of FY 2019. This extensive process involved reviewing national policies and strategies, researching relevant policies from Chile, Israel, and Singapore as well as consulting widely with DAI experts. Once refined, Nguriza Nshore presented the draft EDP to the MINICOM senior management and technical teams who provided feedback and requested further research on synergies with other national policies including the National Industrial Policy, Cluster Strategy, Made in Rwanda Policy, Education Strategy, and Agriculture Strategy. This ensured the policy was relevant to the Rwandan context and other GoR priorities and goals.
39 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Supported MINICOM to engage constituents and encourage ownership at all levels in policy development process. During FY 2019, Nguriza Nshore worked with MINICOM to set a new standard of ensuring that the voices of Rwandans at all levels of society are adequately represented at every stage of policy development. This is an area that has been a limitation of other policies developed in Rwanda. What is included in the EDP? Some other policies in Rwanda have been developed by external actors but are not formed to create the ownership and buy-in of relevant government institutions or the people, meaning that policies don’t often get implemented.
Nguriza Nshore sought to disrupt the way policies are typically written in Rwanda by ensuring each stage of the EDP development process involved multiple stakeholders and The key goal of the EDP is to remove barriers to entrepreneurship allowed space for co-creation and enterprise growth in Rwanda, resulting in more bankable and collaboration. In addition businesses, enterprise growth, and creation of 1.2 million jobs over to involving stakeholders in the the next seven years. mapping and data collection The seven Pillars of the EDP include: human capital and phases of the EDP, Nguriza management, business support, access to finance, business enabling Nshore partnered with environment, access to markets and value chains, technology and MINICOM to ensure a infrastructure, and culture. multitude of stakeholder voices were heard and consulted during the validation phase of the EDP. This took place in the third quarter of FY 2019.
The EDP was validated in all five provinces of Rwanda. In each province Nguriza Nshore conducted meetings with MINICOM local government staff to prepare them on the process and then subsequently hosted validation workshops with MINICOM. The validation workshops brought together stakeholders representing entrepreneurs, business people, cooperative leaders, actors from financial institutions, higher education representatives, local government representatives, representatives of “Being involved in this policy private sector groups such as the PSF, and groups development process strengthens representing youth, women, and people with disabilities. me. It is my first time to participate The workshops in all five provinces included 363 in the development of a policy. stakeholders, including 122 women, 47 youth and 21 When I hear all the information representatives of the National Council of Persons with provided, it shows me that the Disabilities. problems I face will be solved.” Nguriza Nshore collected feedback from stakeholders - Odette, woman entrepreneur in during the validation workshops and this was Musanze who attended validation workshop
40 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov incorporated into the draft policy before it moves to the next level of approval. Overall feedback from the stakeholders at the validation workshops was positive. The attendees indicated the policy is well-drafted and addressed the entrepreneurship challenges they have. The stakeholders were appreciative that they were involved in the EDP process from data collection until validation. They indicated that their voice is rarely heard on policies that directly affect them. The
EDP Validation workshop in the Western province stakeholders were also concerned that MINICOM and Nguriza Nshore share the outcome of the policy with them and all related action items that could impact their work. Finally, the stakeholders consulted were concerned about implementation of the EDP. They mentioned that there was a previous policy on SMEs but nothing happened with it. They wanted to make sure they see the action points of the EDP coming to life.
The feedback provided by these stakeholders was indispensable both for the EDP and again for MINICOM as an institution to better understand the variety of perspectives and needs of various entrepreneurship ecosystem actors. MINICOM has continued to emphasize that it is appreciative of the process through which the EDP was developed and that it aims to transfer this learning into all future policies the ministry develops. This trajectory is clearly seen through the way in which MINICOM took total ownership of the approval phase of the EDP, described below.
Encouraged learning and sustainability mindset in long-term policy planning. A major gap of the previously expired 2010 SME Development Policy which proceeds the EDP is that it was poorly implemented, primarily because no funding was allocated for it. MINICOM recognized this gap and thus requested Nguriza Nshore assist them in learning from their experience by developing an institutional framework for implementing the EDP. This institutional framework, created in the fourth quarter of FY 2019, outlines all the necessary action items and institutions responsible for implementing each policy item in the EDP. It also maps out the budget required for each action item. This framework will be critical as MINICOM moves towards implementation of the EDP in FY 2020 and has encouraged the ministry to be intentional in long-term policy planning. MINICOM has also indicated that this is an approach to policy design it appreciated and recognized its value and it’s something that the ministry intends to continue to utilize as it engages in future policy design processes.
In addition, this was an important opportunity for Nguriza Nshore to continue to foster a partnership with MINICOM as well as to be able to influence the implementation of the EDP, particularly in the areas that are directly aligned with the Activity’s goals.
Supported MINICOM in gaining approval on EDP Validation workshop in Kigali city the EDP. During the fourth quarter of FY 2019, Nguriza Nshore supported MINICOM to gain final levels of approval on the EDP. First, Nguriza Nshore supported MINICOM in presenting the EDP to a MINICOM Senior Management Meeting, where the policy was shared with Honorable Minister Soraya Hakuziyaremye and she provided feedback on the policy, which was incorporated.
41 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov A snapshot of the EDP development process Second, MINICOM requested two further validation workshops to involve 1. Discussion & Validation of Inception Report (October 2018) • Meetings with 33 stakeholders and experts in the field, including GOR, private more private sector actors. The first sector, youth and women councils, other actors in finance sector validation was with women and youth 2. Data Collection in 20 Districts Across Rwanda (December 2018) • Interviews and focus group discussions in 20 Districts with 313 individuals representatives from the National from private, public and CSO sectors (District Representatives, PSF, Special Economic Zone, Kigali Innovation Center, National Youth Council, Women Chamber of Women Entrepreneurs and Chambers) the National Chamber of Youth 3. Discussion on Draft Policy by MINICOM Management (March 2019) • Management at MINICOM reviewed the Draft Policy and provided feedback Entrepreneurs. With 74 people in
4. Provincial Validation Workshops (April to June 2019) attendance, this was an important • Workshops in every Province of Rwanda with 363 stakeholders, including 122 women, 47 youth and 21 representatives of the National Council of Persons opportunity to amplify women and with Disabilities youth’s voices in ensuring the policy 5. MINICOM Senior Management Meeting (July 2019) • Senior Management reviewed the draft policy and feedback from the validation adequately reflected their specific needs workshops; provided comments on the draft document and challenges. The second validation
6. Stakeholders’ Validation Workshops (September 2019) workshop was with other key • A workshop with 74 youth and women entrepreneurs and representatives from umbrella organizations; a workshop with Development Partners and a Government of Rwanda personnel from workshop with GOR Representatives other Ministries who were optimistic 7. Sector Working Group Validation Workshop (September 2019) • Validation workshop and presentation of the Policy at the Sector Working about the policy and the potential it has Group on September 10, 2019 to foster the development of Rwanda 8. Economic Cluster Workshop (September 2019) through the growth of the private sector. • Minister of MINICOM presents the EDP to Ministries within the economic cluster for approval Third, Nguriza Nshore also supported 9. Inter-Ministerial Coordination Committee (September 2019) • Minister of MINICOM presents the EDP for approval MINICOM in hosting a major validation
10. Cabinet Approval (Pending September 2019) workshop for the Entrepreneurship • Minister of MINICOM presents the EDP to Members of Cabinet for approval Development Policy (EDP) with the Sector Working Group (SWG),
composed of various development
partners and public and private sector leaders involved in the entrepreneurship and business sectors. The validation was chaired by the Director General of the National Industrial Research and Development Agency in Rwanda as well as the African Development Bank Country Manager. Feedback on the EDP “The enabling environment part of the EDP excites me the most. You can given by attendees was overwhelmingly positive. MINICOM also took ownership in this SWG validation workshop which have everything you need (business support, finance, etc.) but the demonstrates the ownership it felt over the policy at this environment matters a lot. stage, which is unusual for most policies in Rwanda.
It also means a lot to me that the Finally, Nguriza Nshore partnered with MINICOM to host a lower level people in society are week-long quality assurance workshop on the EDP together involved; this is a sign of good with other leadership.” entrepreneurship - Bonaventure, youth entrepreneur in experts in Rwanda from Musanze who attended validation Akazi Kanoze Access, a workshop youth and livelihood
skills training organization, Inkomoko, a business accelerator, DOT Rwanda, a social innovation accelerator, and Carnegie Mellon University Rwanda. The team incorporated feedback given during the
multiple validation workshops and perfected the policy document in preparation for its presentation to the EDP Sector Working Group Validation
Economic Cluster and eventually the Cabinet. Conducting
42 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov
quality assurance on the EDP in close collaboration with MINICOM was very important as otherwise the policy would not have been ready to move forward. MINICOM also took ownership in this role and pushed the approval process forward demonstrating how important this policy is to the Government of Rwanda.
The EDP will go for final Economic Cluster and Cabinet approval in the first quarter of FY 2020. Once approved, the EDP will cascade several Component 1 and Component 2 activities that the Rwandan government and private sector now have a clearly defined interest in. This will allow Nguriza Nshore to align all future activities with the entrepreneurship ecosystem priorities that will be sustained beyond the life of the Activity.
“All that has been achieved so far, is a result of strong collaboration between MINICOM and Nguriza Nshore grounded on flexibility and effective communication at all levels be it senior and technical levels. The success is also attributed to very smooth and agile procedures between the two parties in which decisions and implementation have been made in shorter periods of time.” Jonas Munyurangabo, Director General of Planning and M&E, Ministry of Trade and Industry
Private Equity Law
Although the EDP is not yet fully approved, it has already begun creating other important opportunities for Nguriza Nshore, the first of which is the creation of a Private Equity Law. Nguriza Nshore will draft a ‘thought piece’ on what the law should like during the first quarter of FY 2020. MINICOM anticipates that BNR will need additional information and a justification the law will not add systemic risk to the financial sector. Establishing Implementation Mechanisms for the EDP Nguriza Nshore has begun to support MINICOM in developing the necessary implementation mechanisms for the EDP during the fourth quarter of FY 2019. The first step Nguriza Nshore has taken is to begin the process of hiring an embedded advisor who ensure the EDP is properly implemented.
Relationship Building with Other Entrepreneurship Ecosystem Actors
Nguriza Nshore also built relationships with other key entrepreneurship ecosystem actors in FY 2019, including:
PSF. Nguriza Nshore met with the CEO of PSF during FY 2019 and intends to engage them further in FY 2020.
Other USAID Projects: PSDAG and Hinga Weze. Nguriza Nshore attended the PSDAG Learning Event to share successes, lessons learned, tools developed, and recommendations for best practices as suggested by PSDAG. This was an important chance for the Activity to ensure that it learns from the lessons and challenges PSDAG faced in order to not repeat mistakes or duplicate their efforts. Nguriza Nshore also attended the USAID PSDAG close-out event to network with relevant development partners as well as SMEs supported by PSDAG that could seek investment. A few promising SMEs were identified at the event. Additionally, USAID built a relationship with Hinga Weze. This has also allowed Nguriza Nshore to identify potential areas of overlap and to determine if Nguriza Nshore can introduced any Hinga Weze SMEs into its investment pipeline.
43 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov HortInvest. Nguriza Nshore attended the HortInvest project launch as well as the project outlook session. There are a few SMEs that HortInvest has referred to Nguriza Nshore, such as Agasaro Organics, that the Activity is now working with.
National Youth Council (NYC) and Women’s Chamber of Entrepreneurs (WCE). Nguriza Nshore established relationships with the NYC and WCE during the validation workshops. Nguriza Nshore engaged these partners during the fourth quarter of FY 2019 to learn how the Activity can better integrate a gender and disability lens into all component activities.
RDB. Nguriza Nshore worked with RDB on the EDP both in the quality control workshop as well as in the data collection phase.
Bureau of Standards. Nguriza Nshore met with the Bureau of Standards to better understand how the Activity can work with SMEs to better meet the Bureau’s standards.
BDF. Another potential outcome of the EDP is the opportunity to provide technical assistance to BDF. BDF submitted a concept note to Nguriza Nshore in the second quarter of FY 2019, but per MINICOM’s request, the Activity will hold off on providing assistance until the EDP is completed. A key recommendation of the EDP will be to re-evaluate the BDF including conducting a performance review as banks don’t trust them because they historically haven’t honored the guarantees they provide. Nguriza Nshore will reconsider working with BDF after weighing the priority actions that arise from the institutional framework.
MINAGRI. Nguriza Nshore attended a MINAGRI technical working group session to learn how the Activity might partner with MINAGRI to understand the Private Sector Finance Leveraging Strategy for SMEs in the agriculture sector. Nguriza Nshore gained important information to share with SMEs about new government strategies and focuses.
Provincial Governments. Nguriza Nshore established important relationships with provincial governments through the EDP validation process. These relationships will be critical when it comes to implementing the EDP. LESSONS LEARNED AND OPPORTUNITIES IDENTIFIED
Importance of incorporating a market systems perspective. Nguriza Nshore, learned from the year-long process of developing the EDP, that the type of policy work the Activity does has an impact on the entire entrepreneurship ecosystem as opposed to developing a policy just for the sake of developing a policy. The system wide impact is already becoming clear, understanding MINICOM’s involvement from the very beginning and ownership over the EDP. For example, during the fourth quarter of FY 2019, MINICOM requested, at their own initiative, to have more validations of the EDP from additional stakeholders.
There are significant opportunities that have arisen from the EDP’s development. First, because MINICOM has already taken ownership over the policy, it will be prioritized and implemented since the ministry considers it as one of its key priorities to move the policy agenda forward. For instance,
44 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov during the fourth Moving from CIBER to a market systems approach quarter of FY 2019, Nguriza Nshore The Competitive Impact of Business Enabling Environment Reforms (CIBER) analysis was an initial focus for Nguriza Nshore when the Activity started. worked with However, as FY 2019 rolled out and Nguriza Nshore shifted towards a market MINICOM to develop systems oriented approach, Nguriza Nshore decided to drop CIBER, because it an implementation plan wasn’t ambitious enough. It would have accounted for an Activity milestone, but which includes a cost wouldn’t have created the long-term impact that Nguriza Nshore is anticipating breakdown. In from the EDP, which has a much larger focus on sustainability and systems surveying other policies building. that were never CIBER was focused on developing a horticulture strategy which had a limited implemented, one range focusing on a single value chain, whereas the EDP targets a much broader major gap they had was range of areas that impact the entrepreneurship ecosystem such as finance, that there was no processing, transport, etc. This presents a dramatic shift from what would have implementation plan. happened if Nguriza Nshore only focused on CIBER, as Nguriza Nshore is now Second, Nguriza playing a pivotal role in shifting the entire system. Also, CIBER would have pushed Nshore has built trust the Activity to work through MINAGRI as our line ministry, but once Nguriza with MINICOM and Nshore got off the ground, it became clear that MINICOM was a much better across other partner for achieving the Activity’s other component goals. government bodies as Based on the opportunities that have already arisen because of the EDP, it’s they can understand becoming clear that the market systems approach will have far greater long-term that the Activity outcomes and is an important mindset shift that Nguriza Nshore has incorporated approaches policy during FY 2019. development in a different way from other projects, allowing collaboration and ownership of the process. This trust is creating other opportunities for Nguriza Nshore, including developing new laws and regulations defined in the EDP, like the private equity law. Third, the government is beginning to use the EDP to request funds from the national government and donors. For example, the African Development Bank has promised to provide the government with financing to implement the EDP.
Opportunity to assist developing new Private Equity Law. One lesson Nguriza Nshore learned under Component 2 during FY 2019 is that many outside investors are potentially interested in Rwanda, but don’t know much about the country and have many legal concerns in regard to de- risking their investment: i.e. what the exit laws are, what the dispute laws and regulations are, and how they might repatriate their investments. These questions are not firmly answered in the current legal system which is why the Private Equity Law that will come out of the EDP is an excellent opportunity for Nguriza Nshore to play a role in shaping the legal framework in such a way that encourages outside investment and thereby supports the Activity’s Component 2 activities.
Opportunity to develop an entrepreneurship portal. Another major action point of the EDP that MINICOM has already requested Nguriza Nshore to support with is to develop an entrepreneurship portal that will combine all currently existing portal. This will be a major undertaking, but presents an opportunity for Nguriza Nshore to play a role in shaping the way the EDP is communicated and shared with the entire population of Rwanda to ensure equity and access to information which are cornerstones to building a better business enabling environment.
Opportunity to review BDF’s guarantee fund. One gap that became clear from developing the EDP is that the BDF’s guarantee fund is not operating as optimally as it could, which in turn means SMEs are struggling to access finance they need even though this mechanism is in place. High interest rates and high collateral requirements are barriers for SMEs to access finance. It’s not realistic that
45 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov those barriers will disappear as the collateral requirements are set by the National Bank to maintain economic stability and banks have to keep a certain interest rate in order to maintain their business. This is why pursuing alternative methods of financing like improving BDF’s guarantee fund is critical. Another important opportunity from the EDP calls for raising the awareness of tax regulations and incentives, i.e. most SMEs don’t realize there is a tax grace period of 2 years and this lack of knowledge presents a barrier to many starting businesses.
Importance of close alignment between the government and the Activity. MINICOM was heavily involved with the entire process of developing the EDP. They took ownership of the policy from the very beginning which has implications for how the policy will be implemented. In addition, their involvement streamlined the process. For example, they helped getting the right people to attend the validation workshops by using their influence to call individuals directly and encourage them to attend.
A key learning from this experience is that Nguriza Nshore should cross check for GoR alignment before doing other activities as they can play a very helpful role.
Involving stakeholders from the very beginning is what made the EDP successful. Some other policies in Rwanda have been developed by external actors, but are not formed in a way that create the ownership and buy-in of relevant government institutions and ordinary Rwandans, meaning that policies often don’t get implemented. The EDP stands out because stakeholders were involved in the entire policy development process.
Through a systems lens, Nguriza Nshore is disrupting how policies are typically written in Rwanda by conducting the EDP from the very first mapping stages until implementation in a way that involved multiple stakeholders and allowed for co-creation and collaboration. Feedback from the validation workshops indicated that people already feel much more ownership over this policy than they have about other policies in the past. MINICOM also expressed that they’ve learned a new approach to policy development that they had never seen before. As Nguriza Nshore continues to partner closely with MINICOM and other government institutions on other policy work, there is an opportunity to influence the entire system of how policy is written in Rwanda.
Youth, women, and people with disabilities (PWDs) need to be intentionally involved at every step of policy development. A major oversight by Nguriza Nshore and MINICOM in the EDP process was that both didn’t involve people with disabilities during the data collection stage of the EDP. Nguriza Nshore recognized this when reviewing the segmentation of the attendance lists from the data collection and realized that while women’s groups and youth groups were consulted, no group representing people with disabilities had been brought into the process.
From this learning, Nguriza Nshore made certain that representatives from the National Council of Persons with Disabilities (NCPD) were invited to the validation workshops in each of the five provinces. In addition to the women and youth group representatives, the representatives of NCPD provided tremendous insight into how to make the EDP policy more inclusive for all people in Rwanda. For example, they discussed how the tax policy on businesses provides extra costs for PWDs and requested that the tax policy should specifically consider them. Going forward, Nguriza Nshore needs to ensure that PWDs are intentionally represented in all activities so that their voice is adequately heard and incorporated.
It was invaluable to have MINICOM lead the data collection and validation process of the EDP. MINICOM continually indicated how important it was to have been involved in traveling to different districts and provinces to conduct the data collection and validation of the EDP. In the
46 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov previous SME policy, MINICOM didn’t go out to the field and participate in the process at all, so with the EDP, they felt like they had ownership of the policy. In addition, many MINICOM staff commented that they had no idea what the real challenges people, especially those outside of Kigali, face. Through the EDP process, they experienced and heard ordinary Rwandan’s issues and challenges firsthand which meant they were able to devise a strategy that actually fits the context of the entire country.
Seeing how valuable this was, Nguriza Nshore will continue to heavily involve MINICOM and other government partners in other similar future activities. CHALLENGES AND MITIGATING MEASURES
Nuances of implementing the EDP. After the EDP is adopted, Nguriza Nshore and MINICOM will have major questions to consider regarding how the policy will tangibly be implemented, which institutions will be responsible for which action items, which actors (government or other donors/stakeholders) will commit to financing the policy, and how those actors will be mobilized. If these questions are not adequately addressed, it could hamper the implementation and success of the EDP.
The key mitigating measure will be to motivate donors and the GoR to be involved in implementation from the beginning, especially in terms of funding.
Avoiding creation of a duplicate policy. One challenge that arose during the final validation workshops during the fourth quarter of FY 2019, is that some donors are attached to the previous SME strategy as they’ve designed some programs related to it. Communicating clearly that the EDP is not an entirely separate policy but rather connected to the former SME policy has proved to be a challenge for MINICOM and Nguriza Nshore. The EDP includes SMEs as the former policy did, but is much broader than this accounting for microenterprises and startups as well as the entire entrepreneurship ecosystem. If MINICOM and Nguriza Nshore fail make it clear that the EDP is inclusive of SMEs while still having broader ecosystem goals, there is a concern another development partner will come in and try to create a similar SME strategy.
The mitigating measures for this during the fourth quarter of FY 2019 involved making it very clear in the EDP how SMEs are included. As the EDP is approved and moves into implementation, Nguriza Nshore and MINICOM will need to be strategic in developing a communications campaign and strategy to get other stakeholders on board. Lastly, a strength in avoiding a duplicate policy is that because MINICOM has been so heavily involved in developing the process from the very beginning, the ministry is aware that SMEs are fully included in the policy and are prepared to answer questions and negotiate any tensions that might arise between donors.
Including all stakeholders in policy development process presents a challenge. One challenge Nguriza Nshore faced during the entire EDP development process is that while including all stakeholders is absolutely critical and what made the process a success, it’s also very time consuming and difficult to practically undertake. This is why many policies don’t end up being inclusive of all stakeholders.
The mitigating measure Nguriza Nshore took to ensure that all stakeholders were adequately represented and heard was to get buy-in from the bottom of the pyramid and then work through to the top leaders. For example, there were some officials and ministers who were not interested in being involved in the development of the EDP at the beginning as they saw it as just another policy.
47 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov However, Nguriza Nshore was strategic and went out to the provinces and got buy-in from citizens during the data collection phase. After this, relevant leaders were much more interested in the policy, because they are accountable to the voters. Once those leaders were on board, Nguriza Nshore and MINICOM were able to get the backing of the minister and other relevant ministries on the policy because they witnessed being developed by many groups across the country. This gave more weight to the policy than if it had been developed without including all levels of stakeholders.
Scheduling the EDP validations. The EDP validations involved many stakeholders including actors at multiple levels of the government. This meant that agreeing on dates for the EDP was difficult and time consuming since the schedule kept changing based on government priorities beyond Nguriza Nshore’s control.
Building a strong relationship with MINICOM was the best way to mitigate this challenge as they could use their influence to eventually fix dates for the validation workshops. This challenge is likely to arise in any other similar work the Activity does. However, despite the time it takes to coordinate these various actors, the pay-off is worth it as the EDP established buy-in from key constituents.
Lack of continuity between policies. The SME policy prior to the EDP was not fully implemented because no funding was allocated for it. Thus, in drafting the EDP, Nguriza Nshore and MINICOM had to essentially start from scratch rather than forming the EDP on a prior policy. This was more time consuming and made stakeholders inherently skeptical of the EDP’s success as they had witnessed the previous policy fail.
The key to mitigating this for the future is to ensure the EDP is implemented and monitored. To this end, MINICOM has requested that Nguriza Nshore assist them in developing an advisor position to oversee the policy’s implementation as well as in building out an institutional framework. Nguriza Nshore will also build the capacity of MINICOM to be able to complete an evaluation at the end of the seven-year term of the policy so that any future policies can be based from the EDP, contributing to broader sustainability of the Activity’s work.
CROSS CUTTING THEMES
GENDER
Despite Rwanda’s landmark achievements in promoting gender equality, women still face significant barriers in equitably accessing finance, succeeding as entrepreneurs, and seeking investment. Gender-based social norms and institutional biases against women limit women’s ability to access finance, with the norm too often being that women still have to get consent from their husbands before securing a loan, particularly when collateral is required. The private equity sector still sees higher rates of men seeking and closing investment in comparison to women, a global trend which is further amplified in Rwanda. And as entrepreneurs, women face unique barriers in building and growing their businesses due to gender-based social norms and expected gender roles.
During FY 2019, Nguriza Nshore made significant progress in building key relationships and discovering opportunities to address systemic biases related to gender within the financial services and investment ecosystem and business enabling environment.
48 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Expanded Access to Finance
As Nguriza Nshore works to expand the capacity of financial institutions to lend to SME agribusinesses, the Activity aimed to incorporate a gender lens into all Component 1 activities.
Financial baseline. During FY 2019, Nguriza Nshore completed an extensive financial baseline survey which helped the Activity gain an in-depth perspective on financial institutions in Rwanda and what challenges and gaps they face. One interesting finding showed that while bankers in general have positive views towards female clients who typically have higher repayment rates, only one of 16 banks in Rwanda has a women’s banking unit. This means there is an existing need to create more financial products which specifically target women and address their unique financial access challenges. This is a key learning Nguriza Nshore will integrate into its engagement with financial institutions in FY 2020.
Increased Investment in Rwanda
Nguriza Nshore has also incorporated a gender focus into its Component 2 work of increasing private and commercial investment in SMEs.
Invest Africa US Women Invest Mission to Rwanda. As Why the Women Investors described in detail in the Component 2 section, Nguriza Nshore Mission Initiative? partnered with Invest Africa US for its inaugural Women "In order for Africa to truly reach its Investors Mission initiative (WIM). According to Invest Africa US, economic potential, women this trip was a landmark moment, since it was the first women entrepreneurs must be invested in but investment mission to Africa. Globally, women investors still the investment community is represent a minority in comparison to men, so it was very dominated by men and they tend to significant that this trip happened and that Nguriza Nshore was invest in businesses owned by men." selected to be a part of it. Sandrine Nzeukou, Executive Director Five of the eight entrepreneurs that pitched are supported by of Invest Africa US speaking on Kigali Nguriza Nshore and of those five, four of them were women. It in the Morning Show on Royal FM on was an important moment to showcase the potential of women September 10, 2019 entrepreneurs in Rwanda and the WIM investors were impressed. Sandrine Nzeukou, Executive Director of Invest Africa US, summarized the importance of their trip both for the women investors as well as the women entrepreneurs in Rwanda: "In order for Africa to truly reach its economic potential, women entrepreneurs must be invested but the investment community is dominated by men and they tend to invest in businesses owned by men."2
ACA: linking with female investors. At the ACA 2019 Summit, Nguriza Nshore was paired with two female ambassadors who are members of the ACA board. These women were great resources for the Nguriza Nshore team and the four Rwandan SMEs as they navigated the summit. Nguriza Nshore has continued to build a relationship with these two ambassadors and they are both planning to visit Rwanda in FY 2020, sponsored by the Activity, to build the pathway for more angel investors from ACA to invest in Rwanda.
At the ACA 2019 Summit, Nguriza Nshore also attended the women’s dinner which was comprised of women investors and entrepreneurs. This gave the Activity insight into the unique challenges and opportunities female entrepreneurs face. Yvette Ishimwe, CEO of Iriba Water Group, was
2 Quote from Sandrine Nzeukou on Royal FM ‘Kigali in the Morning’ radio show on September 10th, 2019
49 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov recognized in the top 3 for the ‘Venture Bucks Award,’ earned by popular vote, at the ACA 2019 Summit. This was another important chance for Nguriza Nshore to link with female investors and to promote the talent and investment potential of women entrepreneurs in Rwanda
SME workshops. In Nguriza Nshore’s first SME workshop, the Activity purposively invited all female entrepreneurs in its contact list to attend. Of the 73 businesses that attended the workshop, 29 attendees were female. A lesson learned was that even with considerable outreach to female entrepreneurs, Nguriza Nshore still did not reach gender parity at the workshop. From discussions with the Rwanda Women Chamber of Entrepreneurs (RCWE), Nguriza Nshore learned that a more effective method to get more women entrepreneurs in the room is to organize an SME workshop that particularly targets women entrepreneurs. Nguriza Nshore is planning to do this in the first quarter of FY 2019 in partnership with RWCE.
Improving the Business Enabling Environment
Under Nguriza Nshore’s mandate of strengthening the business enabling environment, the Activity has been intentional about incorporating a gender lens into all policy work and related Component 3 activities.
Entrepreneurship development policy. Nguriza Nshore intentionally considered a gender lens in every stage of the development process of the EDP, with the intention of ensuring the policy accurately reflects all voices within the entrepreneurship ecosystem including women to the ministerial level.
In order to achieve this, Nguriza Nshore and MINICOM intentionally involved women and gender- related group representatives beginning with the initial inception mapping and data collection phases of the EDP. During the mapping phase, Nguriza Nshore met with 33 stakeholders and experts in the entrepreneurship ecosystem including members of the Ministry of Gender and Family Promotion (MIGEPROF) to better understand issues related to gender in creating an effective business enabling environment. In the data collection phase, Nguriza Nshore met with a diverse group of stakeholders in 20 districts in Rwanda. A total of 65 female stakeholders including female entrepreneurs and representatives of the National Women’s Council participated in focus group discussions and consultation meetings of 313 total participants. Although not yet a majority percentage, this still presented a greater representation of women in this phase of policy development than has happened with most policies in Rwanda.
In addition, Nguriza Nshore and MINICOM intentionally involved women in the validation process of the EDP. In each of the validation workshops in the five provinces of Rwanda, Nguriza Nshore and MINICOM invited representatives from the RCWE to attend and offer their feedback on whether the EDP is reflective of women’s specific needs and barriers in the entrepreneurship ecosystem. The Activity also worked with the PSF at the district level to ensure that female entrepreneurs were invited and attended the validation workshops. Of the 313 stakeholders consulted during the validation workshops, 122 were women. An example of feedback given by these attendees was a request for business management training as most women, particularly in rural areas, do business in cooperatives but have never received training on how to best manage and maximize the potential of these groups. The feedback offered by women entrepreneurs and RCWE representatives was very insightful and incorporated into the draft EDP.
50 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Finally, MINICOM requested that there be two additional validation workshops to better capture the voices of private sector actors, and in particular the perspectives of women and youth entrepreneurs. Nguriza Nshore supported MINICOM to facilitate the additional validation workshops, including one solely focused on women and youth representatives from the National Chamber of Women Entrepreneurs and the National Chamber of Youth Entrepreneurs. With 74 people in attendance, this was an important opportunity to amplify women and youth’s voices in ensuring the policy adequately reflects their specific needs and challenges.
Relationship building with key gender-related actors. Through the EDP, Nguriza Nshore built a strong relationship with the Rwanda Chamber of Women Entrepreneurs (RCWE). Nguriza Nshore further fostered the relationship with RCWE during the fourth quarter of FY 2019 with the interest of better understanding how Nguriza Nshore can integrate a gender lens into its work. In addition, Nguriza Nshore also aims to work with RCWE to determine how the Activity can source more women-owned businesses into its pipeline. In this interest, Nguriza Nshore has already planned to have an SME workshop with RCWE members and other women entrepreneurs during the first quarter of FY 2020. YOUTH
Youth make up a majority of the population in Rwanda and compromise a great percentage of the total entrepreneurs in the country. Yet youth continue to face many barriers particularly in gaining access to the finance. Youth are particularly disadvantaged in comparison to other population groups as they don’t have an asset base and thus are barred from traditional methods of financing. They also EDP validation workshop with women and youth often lack the skills and support systems they need to succeed as entrepreneurs and owners of SMEs.
Throughout FY 2019, Nguriza Nshore has taken steps to address the systemic biases related to youth within the financial services and investment ecosystem and business enabling environment.
Expanded Access to Finance
As Nguriza Nshore works to expand the capacity of financial institutions to lend to SMEs, the Activity aimed to incorporate a youth lens into all Component 1 Activities.
Financial baseline. During the second and third quarters of FY 2019, Nguriza Nshore conducted a financial institution baseline and gathered key information about what makes banks hesitant to lend to youth: youth don’t have collateral; youth tend to default on their loans and banks need to invest a lot of time in monitoring to avoid this problem; youth businesses are often very small making the monitoring required quite expensive for the bank; and, youth typically don’t have strong financial literacy skills and have a reputation for misusing the loans provided to them. Nguriza Nshore will use this data collected to advise banks as they begin to develop products targeted for youth-run businesses. Increased Investment in Rwanda Nguriza Nshore has also incorporated a youth focus into its Component 2 work of increasing private and commercial investment in SMEs.
51 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Young Founder’s Conference. The majority of youth-run businesses are start-ups which don’t meet the criteria of being established SMEs that Nguriza Nshore normally works with under Component 2. However, some of these young companies have the growth potential to become SMEs that Nguriza Nshore would work with in Year 4 or 5 of the project. While Nguriza Nshore can’t yet provide direct support to these young companies, the Activity has taken the opportunity to participate in events that can help educate youth entrepreneurs on what the trajectory looks like for seeking investment and how they might be able to access private equity as their businesses grow.
For example, Nguriza Nshore participated in the Young Founder’s conference, organized by Westerwelle Start-up Haus. The conference brought together 15 start-ups and SMEs from East Africa, including five from Rwanda. Nguriza Nshore gave presentations on different types of finance options available to businesses at various stages as well as an overview of the finance ecosystem in Rwanda. Only one of the firms in attendance, from Uganda, had experience with raising investment. None of the Rwandan firms had experience seeking investment and it was a good opportunity for these youth entrepreneurs to learn about what investment is and what it takes to raise it. Some of the businesses are hopeful to partner as they continue to grow.
SME workshops. The SME workshops Nguriza Nshore hosted have also been an important place to connect with youth entrepreneurs and help increase their awareness of what it means to seek investment. In the first SME workshop, 20 youth entrepreneurs (six female, 14 male) ranging from 20 years old to 30 years old attended. In the second workshop, of 15 SMEs in attendance, two were youth owned and two were mixed-ages owned.
Improving the Business Enabling Environment
Nguriza Nshore has also been intentional about incorporating youth into all Component 3 work geared at improving the business enabling environment.
Entrepreneurship development policy. Just as with gender, Nguriza Nshore intentionally considered a youth lens in every stage of the development process of the EDP. In the mapping phase, Nguriza Nshore consulted with members of the National Youth Council (NYC) and the Ministry of Youth to better understand the challenges youth face within the business enabling environment. In the data collection stage, Nguriza Nshore purposively included nine youth entrepreneurs in five of the 20 districts. Representatives of the NYC or their respective districts attended the EDP meetings in 11 out of 18 districts.
Youth voices were also represented at the EDP validation workshops with representatives of the NYC attending in each province. A major concern presented by youth is that a lack of assets for their age group presents a barrier to accessing the finance they need to start and grow businesses. For example, BDF gives start up kits to TVET graduates. However, because it is hard for youth to access finance, they end up with equipment but don’t have other funds they need to get a business up and running. They requested a complimentary loan or grant be given alongside the start-up kits. Another example the youth representatives gave was that Business Development Advisors (BDAs) who are deployed to districts to help entrepreneurs start businesses, don’t do any follow-up and only advise on creating a business plan. Youth suggested that the EDP establish incubation centers to complement the work the BDAs do. The feedback collected from youth representatives was incorporated into the EDP and considered heavily in the implementation plan as there are major youth-related gaps to fill, such as restructuring BDF to allow more youth to access the finance they need to start and grow their businesses.
52 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Finally, as mentioned above, MINICOM amplified youth’s voices in the EDP by having an additional validation workshop which brought together women and youth representatives from the National Chamber of Women Entrepreneurs and the National Chamber of Youth Entrepreneurs with 74 people in attendance. Youth raised similar concerns as to what was voiced in the provincial validations and Nguriza Nshore and MINICOM took their feedback into account while revising the EDP.
Relationship building with key youth-related actors. Through the EDP, Nguriza Nshore built strong relationships with the NYC as well as the Chamber of Young Entrepreneurs. These are two bodies that Nguriza Nshore will continue to work with into FY 2020 with the intention of engaging more youth entrepreneurs in Nguriza Nshore’s work. PERSONS WITH DISABILITIES
Persons with disabilities (PWDs) also face significant systemic barriers to equitably accessing finance and gaining the resources they need to succeed as entrepreneurs and owners of SMEs. Most economic and political policies are not designed with PWDs in mind. For example, a person with disabilities called to a policy dialogue might not be able to attend as easily as a person without disabilities due to extra transport costs given that some cannot use public transportation. Many buildings where events are held are not accessible. Even things like paying tax requires mobility which can present a barrier. There is no special scheme for PWDs within the entrepreneurship ecosystem which places PWD entrepreneurs and SME owners at a major disadvantage.
Expanded Access to Finance
One major learning from the EDP validations workshops was that the Activity was not prepared to properly accommodate attendees who had disabilities despite having specifically targeting representatives of PWD organizations to attend. Nguriza Nshore learned from this during the fourth quarter of FY 2019, when conducting the AMIR workshops on the investment trust fund. At these workshops, Nguriza Nshore ensured that PWDs were given extra transport to make up for the extra costs they had in reaching the workshops. This is just one example of the mindset shift Nguriza Nshore is making as it continues to seek to involve persons with disabilities in all project activities.
Increased Investment in Rwanda
Nguriza Nshore also aims to work with entrepreneurs who have disabilities as well as SMEs that employ people with disabilities under the Activity’s Component 2 goal of increasing private and commercial investment in SMEs.
During the first quarter of FY 2019, Nguriza Nshore spoke with SMEs regarding the challenges and opportunities hiring employees with disabilities to better understand how the Activity might partner with SMEs that are owned by PWDs or that employ PWDs. In the second quarter of FY 2019, Nguriza Nshore began initiating conversations with Masaka Creamery, an agribusiness which intentionally employs people who are deaf, including 17 of its 28 workers. This is a continuation of the support that was provided to Masaka Creamery by the USAID PSDAG project and is the first SME that Nguriza Nshore is working with that employs PWDs.
53 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Nguriza Nshore aims to source other that are either are owned by or employ PWDs but has found it a challenge to connect with these SMEs through the Activity’s normal sourcing mechanisms (i.e. walking into the office or showing up at an Nguriza Nshore event) as they are not necessarily accessible by PWDs. Given this lesson learned, Nguriza Nshore aims to utilize the relationship it has established with the National Council of Persons with Disabilities (NCPD) during FY 2019 in order to devise sourcing strategies that will better reach businesses owned by or that employ PWDs.
Improving the Business Enabling Environment
Nguriza Nshore has also been intentional about incorporating people with disabilities into all Component 3 work geared at improving the business enabling environment.
Entrepreneurship Development Policy. As mentioned in the lessons learned section under Component 3, one major oversight by Nguriza Nshore and MINICOM was not including people with disabilities in the early stages of the EDP development process. Institutions representing PWDs were not consulted during the mapping phase and PWDs were not intentionally brought into the data collection stage. Nguriza Nshore recognized this when reviewing the segmentation of the attendance lists from the data collection and realized that while women’s groups and youth groups were consulted, no group representing people with disabilities had been brought into the process.
From this learning, Nguriza Nshore made certain that representatives from the NCPD were invited to the validation workshops in each of the five provinces. This was significant as the previous SME strategy didn’t consider PWDs – women and youth were incorporated as guiding principles, but PWDs were overlooked. In each province, PWDs were vocal about being intentionally included in the EDP, with a focus on enabling PWDs to equitably access and engage in relevant elements of the policy. For example, in other countries such as Kenya, there is a disability fund for entrepreneurs, so attendees requested something similar be considered in Rwanda. The feedback offered by PWDs was also incorporated into the EDP.
This was a learning point for MINICOM as well. Hearing directly from representatives of the NCPD during the validation workshops was valuable for MINICOM and provided an important catalyst for the Ministry to intentionally include PWDs in future policies. CHALLENGED AND MITIGATING MEASURES
Not all venues in Rwanda are disability friendly. At one of the EDP validation workshops, the lunch was offered at a restaurant which was hard to reach for the participants who had physical disabilities. Another example arose when a woman who used a wheelchair attended the validation in the Southern Province but was unable to take public transportation as most buses are not wheelchair friendly, so she had to take a private taxi to attend the workshop. Nguriza Nshore covered her extra transportation costs; however; this presented a learning curve for Nguriza Nshore: if the Activity incorporates PWDs into its work, it needs to be prepared to properly accommodate them.
In the future, Nguriza Nshore will mitigate this by utilizing the expertise of NCPD to cross-check that any venue the Activity or partners plan to use is disability friendly and will get their guidance on any other relevant steps the Activity can take, such as accommodation stipends, to ensure that PWDs are able to equitably access the workshop or event.
54 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Banks are hesitant to lend to youth. The financial institution baseline revealed that banks are hesitant to lend to youth because of the perceived risks and time-investment in terms of monitoring required on the part of banks associated with youth loans. The lack of collateral youth have was also cited by banks as limiting their lending. Nguriza Nshore will work with banks to devise de-risking strategies to make youth lending more appealing to financial institutions over the coming quarters.
PWDs are not able to equitably access information in Rwanda compared to non-PWDs. Nguriza Nshore has learned that PWDs are less likely to visit the office to get information about the Activity, attend events, or apply for support through the Activity website compared to non-PWDs. The Activity cannot assume that PWDs will get the same information about the Activity as non- PWDs through regular channels.
To mitigate this, Nguriza Nshore needs to allow for equitable access of information about the Activity by targeting groups like the NCPD who can utilize their channels of communication to ensure PWDs are reached. For example, the EDP validation workshops were a success for inclusion because Nguriza Nshore worked directly with NCPD to ensure PWDs were invited and could attend. Nguriza Nshore will keep this in mind when planning future workshops, trainings, and events. The Activity also plans to schedule meetings with NCPD in the first quarter of FY 2020 to seek advice on how to improve sourcing methods to better reach PWDs.
Accessing the women and youth entrepreneur population is also challenging. To date, women and youth entrepreneurs have not proportionately responded to Activity invitations for events and workshops compared to male entrepreneurs. Nguriza Nshore must intentionally target these populations if they are to be equitably involved in Activity interventions.
Nguriza Nshore intends to mitigate this by utilizing new communications channels and media that can better reach female and youth entrepreneurs. The Activity will begin seeking advice from the Rwanda Chamber of Women Entrepreneurs (RCWE), Rwanda Youth Agriculture Forum (RYAF), and National Youth Council on how to better reach these populations. LESSONS LEARNED AND OPPORTUNITIES IDENTIFIED
NCPD is an important institution to work with. NCPD played a key role in involving PWDs at the EDP validation workshops. Going forward, Nguriza Nshore intends to involve the NCPD in various components of the Activity. For example, Nguriza Nshore will work through the NCPD to invite PWDs to upcoming SME workshops. Nguriza Nshore will also involve NCPD when developing strategies with financial institutions or any other future policies under Component 3.
There is opportunity to intentionally source SMEs that are owned by PWDs or employ PWDs. Working with Masaka Creamery is a good first step for Nguriza Nshore but there is an opportunity to source other similar SMEs. Nguriza Nshore intends to meet with NCPD in the first quarter of FY 2020 to request their assistance in identifying other SMEs in Rwanda that are owned by a PWDs or employ PWDs.
55 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov MONITORING, EVALUATION & LEARNING
During this reporting year, Nguriza Nshore worked with USAID Rwanda to finalize the Monitoring, Evaluation and Learning Plan (MELP), complete the SME and financial institution baseline and initial follow-up survey, and build out the suite of data collection tools for performance monitoring and learning. Nguriza Nshore completed the hiring process to fully staff the MEL Team and collaborated with the DAI home office M&E Team to build the data model and Power BI dashboard. This first full year of implementation included challenges and lessons learned, including the adaptive process of conducting the baseline, collecting publicly available data for the Feed the Future context indicators, and building the employment multiplier to measure job creation. HIGHLIGHTS AND SUCCESSES
Monitoring, Evaluation, and Learning Plan (MELP) Revised and Approved
Nguriza Nshore in collaboration with USAID finalized the Year 1 MELP and received its official approval from USAID/Rwanda. However, the targets for Indicator 2 (Number of jobs created with USG assistance [Custom]) remained “to be determined” based on the employment multiplier study. When the model was completed, the MEL Team used the multiplier to calculate number of jobs annually based on the Activity’s targets for investment and finance. Nguriza Nshore took this opportunity to update the entire MELP to ensure it is in line with the current implementation practices and theoretical underpinnings of the Activity. The revised MELP was turned into USAID in the fourth quarter of FY 2019.
Conducted SME and Financial Institutions Baseline and SME Follow-up Surveys
As detailed in the MELP, Nguriza Nshore is conducting a rolling SME baseline. During the first quarter of FY 2019, Nguriza Nshore submitted the Baseline Scope of Work to USAID/Rwanda which was approved in the same quarter. Primary data was collected on the value of SME annual sales, number of jobs at the firm level and hiring practices, needs and plans. Secondary data was used to report on the new Feed the Future context indicators and to construct the employment multiplier model. The MEL Team conducted baseline surveys with six new firms that reached the “investment readiness” or “deal making” stage of the pre-investment support offered by the Activity. Nguriza Nshore submitted a baseline report to USAID/Rwanda in the second quarter. The initial report was revised and resubmitted to USAID/Rwanda in the third quarter. In this reporting year, Nguriza Nshore conducted six-month follow-up surveys for the SMEs with baselines. The follow-up survey is an abridged version of the SME baseline which focuses on capturing information about SME value of annual sales as well as number of jobs at the firm level. The follow-up data is being compared to the baseline data to measure an SME’s individual progress over the life of the Activity. These follow-ups will continue to be conducted bi-annually for SMEs the activity supports.
56 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov In addition to the SME baseline, Nguriza Nshore conducted a financial institution baseline to collect important data on the financial sector in Rwanda. The baseline has informed Component 1 Sub-Activities. The financial institutions data collection for banks is complete, yet data collection for the MFIs and SACCOs will continue into the first quarter of the next reporting year. However, the initial findings from banks and a limited number of MFIs and SACCOs across the country informed the Component 1 Technical Lead on what technical assistance is most Conducting a baseline survey at Gase SACCO, Gashenyi Sector, critical for different financial institutions. Bank Gakenke District. profiles were created for each bank, which gives a snapshot of the institution’s lending portfolio and products, especially for SMEs, agriculture and women. The financial institution baseline will also allow Nguriza Nshore to track spillover effects from the project, as financial institutions may replicate the work the Activity does with other partner institutions. This is a natural reaction within the market and Nguriza Nshore is keen to track this type of positive market system change.
Developed and Finalized a Suite of Nguriza Nshore Performance Monitoring Tool
During the first and second quarters of FY 2019, the MEL Team developed the SME and FI baseline survey tools to help Nguriza Nshore collect baseline information. In addition to the baseline surveys, tools to be used to monitor performance on the Activity’s finance (EG 3.2-27), private sector investment (EG 3.1-14), loans leveraged using de-risking tools (custom), and policy milestones (EG.3.1-d) indicators were developed and finalized in the third quarter. Furthermore, Nguriza Nshore created online partner profiles to track technical assistance. All these tools complete the suite of performance monitoring tools for reporting towards Nguriza Nshore’s nine performance indicators. A significant milestone in the third quarter of FY 2019 was in the digitization of several Nguriza Nshore tools in the online proprietary DAI MIS and in Fulcrum, an online data collection software. Once all tools had been tested and piloted on paper, the MEL Team focused on transferring them into digital format and creating a data model to link the digital data collection tools to Power BI, a Microsoft analytics and visualization service that allows Nguriza Nshore to seamlessly create reports and dashboards.
Digitized Nguriza Nshore Tools and Created the Nguriza Nshore Data Dashboard
Nguriza Nshore is primarily using Fulcrum, a digital data collection software. The Activity will also use the DAI Technical and Administrative Management Information System (TAMIS) to track partners. The MEL Team programmed the Performance Monitoring Tools in Fulcrum and started processing the data that had previously been collected on paper. Data processing started in the second quarter and was completed in the fourth quarter. Going forward, all Nguriza Nshore data will be captured in Fulcrum and supporting documents on project attribution and contribution will be stored in TAMIS.
57 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov In addition to collecting the data and processing it so that it can be easily accessed and analyzed, Nguriza Nshore created internal and external facing data dashboards powered by Microsoft Power BI. The MEL Team is working in collaboration with the DAI home office Management for Development Results (MfDR) Team to create these dashboards. The Nguriza Nshore data is being pulled from the DAI secured SQL database in Bethesda, Maryland into Power BI. During the third quarter of FY 2019, the data model for the Nguriza Nshore dashboard was finalized and the initial programming of the internal indicator dashboard started. In the fourth quarter of FY 2019, John Mataya, a Data Scientist from the MfDR Team traveled to Kigali to conduct a six-day in-person training for the Nguriza Nshore Team. This training ensured that Nguriza Nshore has the internal capacity to maintain and update the dashboard. Both internal and external facing dashboards will be finalized in FY 2020.
Below is an example of a draft indicator dashboard for Indicator 2.3: Number of firms receiving USG-funded technical assistance for improving business performance (Custom). Note that the actuals displayed in the screenshot are not reflective of the Activity’s FY 2019 actuals. The live dashboards are interactive and allow for disaggregation and drilling down by various data points including gender of owner, age of owner, geographic location, partner size, and fiscal year quarter. For all Standard FTF Indicators, the dashboard will display the mandatory disaggregates, as specified in the FTF Indicator Handbook, updated September 2019. In FY 2020, the dashboards will be housed in a password protected domain and USAID/Rwanda will be given login credentials to be able to access up-to-date progress towards annual and life of project targets.
A screenshot of one Nguriza Nshore performance indicator dashboard for indicator 2.3 Number of Firms Receiving USG-Funded Technical Assistance for Improving Business Performance.
58 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Conducted Regular Pause and Reflect Sessions Monthly pause-and-reflect sessions help Nguriza Nshore keep on track and learn Starting in the third quarter of FY 2019, the MEL about market-system changes Director led monthly pause-and-reflect workshops as During the monthly pause-and-reflect sessions, the part of the internal performance monitoring and team goes indicator by indicator to track actuals learning process. The COP, DCOP, Component 2 against targets in regard to performance monitoring. Lead, Component 3 Lead and MEL Team participated. These monthly pause-and-reflect sessions also Each discussion consists of sharing lessons learned, require the team to think critically about which challenges, and allots time to review the investment strategies are working or not working and how to pipeline and progress towards targets for each amplify positive system-level impact in the upcoming indicator. These monthly learning and progress review month. This has fostered internal collaboration and sessions have been very helpful for facilitating internal continuous learning. The monthly collaborations are communication and collaboration and helping to complemented by quarterly review and planning ensure Nguriza Nshore is meeting its performance meetings. targets. In the next reporting year, these monthly sessions will play a key role in giving time and space to identify market-system change and to touch base with the key market-system learning questions in the Nguriza Nshore learning agenda.
Built the Nguriza Nshore MEL Team
During the first and second quarters of FY 2019, the MEL Team was short-staffed. In the second quarter of FY 2019 a new MEL Specialist, Ms. Cynthia Iradukunda joined the Nguriza Nshore team. In the last quarter of FY 2019 a new MEL Assistant, Mr. Rene Gitangaza started. Additionally, in the third and fourth quarters a master’s level Georgetown University student interned with Nguriza Nshore as a Social Enterprise Intern. Ms. Katie Sullivan worked as an embedded advisor with GET IT Ltd. and BeneFactors Ltd. She supported both firms to build impact evaluation systems to track the businesses’ social impact and to attract impact investors. For both firms, not having impact measurement systems was a roadblock for attracting and closing with impact investors.
Supported Rwandan SMEs to Build Impact Measurement Systems
One of the most common barriers to attracting social impact investment is lacking a system to track and measure social impact. Impact investors require impact data, or at the very minimum proof of a firm’s plan to collect data. Conversations with impact investors do not proceed without some evidence that the potential investee has the capacity, interest in and intention to measure social impact. Because of this requirement from social impact investors, building impact measurement systems is one of the most common requests that Nguriza Nshore has received from SMEs in FY 2019. For resource constrained SMEs with limited or no evaluation experience, building an entire functioning impact measurement system from scratch is often times impossible. In this reporting period, the Nguriza Nshore MEL Team provided technical assistance to two SMEs and has plans to co-create impact measurement systems with at least two more in the coming year. Both SMEs received investment due to the project’s technical assistance. The impact measurement system for each SME is unique and requires a user-centered design process and oftentimes utilizing lean data techniques and strategies.
59 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Building an Impact Measurement System for GET IT Ltd. Social impact investors express strong interest in Rwandan SMEs but the companies are not structured and equipped to provide the information the investors require. Seizing this opportunity, Nguriza Nshore partnered with two SMEs to design impact measurement systems that capture the information social impact investors need to make investment decisions. Nguriza Nshore supported GET IT Ltd., an American- founded fresh produce distributor, to develop a log frame, impact indicators, data collection tools and a data collection system to track GET IT’s impact on small-holder farmers’ livelihoods, good agricultural practices, household education and health. To ensure that the GET IT team has the capacity to understand and use the system moving forward, the GET IT agriculture team and 10 local youth data collectors from Rulindo District participated in a three-day M&E training. Nguriza Nshore supported GET IT to conduct a baseline of smallholder farmers in Rulindo District with participatory action research and a livelihoods questionnaire.
GET IT used the data generated from the impact measurement system Nguriza Nshore built to secure a $500,000 low-cost loan from a family foundation. The financing underpinned a 20-hectare ginger pilot that now employs 200 farmers. The ginger is locked-in on a forward contract with a South African buyer. GET IT’s ginger success has led to a new partnership with Griffith Foods (Illinois) and the Rainforest Foundation (New York) for a second 20-hectare plot in red chilis with plans to expand to 800 hectares employing 10,000 farmers. The Rainforest Foundation will certify GET IT as Fairtrade and organic; Griffith will buy all the chilis produced. GET IT also immediately implemented recommendations presented to the leadership team based on qualitative findings from the baseline data collection. Nguriza Nshore plans to support at least two additional SMEs in FY 2020 with impact measurement, building on this successful innovation.
60 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov (Photo top left): Youth data collectors conducting the baseline survey with landowners in Rulindo District as part of the GET IT technical assistance. (Photo top right): Female farmers participating in an interactive exercise to map resource use, control and ownership across gender and societal structures. (Photo bottom left): Farmers clearing the first section of the land for planting ginger (Photo bottom right): Youth data collectors doing an energizer during the data collection training
LESSONS LEARNED AND OPPORTUNITIES IDENTIFIED
Employment multiplier is a learning opportunity for Nguriza Nshore and USAID. Nguriza Nshore constructed an employment multiplier to estimate how many jobs will be created as a result of investment and financing facilitated by the Activity. Nguriza Nshore finished the employment multiplier model during the third quarter of FY 2019 and spent the fourth quarter revising the report. The employment multiplier methodology, concepts, terminology and findings are difficult to explain to a layman audience. Nguriza Nshore worked in collaboration with economic growth and graphic design experts to revise the Employment Multiplier Report.
The extra and time-consuming step of re-writing the report was unexpected but serves as a lesson learned for Nguriza Nshore. This is a vanguard study for both Nguriza Nshore and USAID/Rwanda and external communication of this study has been a challenge from the beginning. Nguriza Nshore believes that the extra time spent to revise and visualize the report will ultimately result in a more tangible and digestible product that will serve as a case study and learning piece for other USAID Activities interested in pursuing this type of approach.
To make the employment multiplier as accurate and precise as possible, Nguriza Nshore will create a micro-model in the next fiscal year to produce a unique employment conversion rate for each economic sub-sector that receives investment or financing. This micro-model will allow input of company details, to the extent available, and provide estimates of increased revenue and direct jobs created in the company receiving investment or finance facilitated by Nguriza Nshore. The indirect and induced jobs will be calculated using the multipliers presented in the employment multiplier study. The model will aggregate these investments into an overall job-growth total. As much as possible, relevant revenue-to-employment factors such as urban/rural company base, tendency to outsource, and use of technology will be considered in job estimation, as long as a solid basis for these factors' impact on job creation can be locally established.
With the EDP in the final stages of approval, Nguriza Nshore has identified the opportunity to conduct an employment study of induced jobs because of EDP implementation. This policy-related study would serve as an advocacy tool and would inform policy makers of the long-term impact of
61 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov the policy in addition to providing valuable employment insight for Nguriza Nshore. This study may be conducted in FY 2020.
Available data not adequate to fully report on EG.3-g employment in the agri-food system (Ag EMP+). Despite close collaboration with National Institute of Statistics Rwanda (NISR), the publicly available datasets do not supply the necessary information to report on Context Indicator EG.3-g, “Employment in the agri-food system [National],” a new context indicator in the Feed the Future Indicator Handbook of March 2018. Nguriza Nshore worked closely with the NISR Labor Force Survey (LFS) team to understand the dataset and their use of International Standard Industrial Classification (ISIC) categories. Nguriza Nshore was granted access to the compiled 2017 LFS, the most recent published edition, consisting of the merged datasets from February and August 2017. During meetings with NISR, it was discovered that the scopes, sampling frame and methodology to collect the LFS, which houses employment data, and the national accounts are very different. Furthermore, the Supply Use Table for Rwanda is created using the expenditure and production approach, which does not provide data on income, and the Labor Force Survey does not include employment in intermediate inputs as a category. These challenges in linking the national accounts data to labor data mean that two components of Ag EMP+ – trade margins and intermediate inputs – are not measurable at this time. The details of the challenge were outlined in the baseline report, submitted to USAID/Rwanda in January 2019. Lessons learned from this process will help inform how Nguriza Nshore can report on Context Indicators going forward by pulling on NISR datasets and alternative sources. The process of trying to gather the necessary data for this context indicator can also inform Feed the Future on the challenges in local contexts to report on this Ag EMP+ indicator.
Baseline data collection is tedious and time intensive for SMEs and Financial Institutions. The process of collecting baseline data from SME partners continued to be tedious and drawn out during this reporting period. The SMEs often times had challenges providing the annual sales data in as much detail as needed based on the definition of the standard FTF indicator EG 3.2-26. To respond to this challenge, the MEL Team made several changes. First, Nguriza Nshore shortened the follow-up survey to ease the burden on busy SMEs and financial institutions, as well as building relationships with the partners to ensure that the MEL Team knows which staff members are best suited to answer the survey questions. Second, the MEL Team started collaborating more closely with the Activity’s transaction advisory partners, which already collect annual sales information and labor data from the SMEs as well as their projected and audited financials. This practice of leveraging the financial models from the transaction advisory partners will continue for the remainder of the project in order to streamline data collection and minimize the burden on partners.
Some financial institutions were reluctant to provide baseline data after finding out that Nguriza Nshore does not provide financing to institutions. The inconsistent definitions of SMEs across financial institutions and low data reporting capacity have also posed a challenge in collecting baseline financial institution data.
Overall, the Nguriza Nshore MEL Team’s response to the baseline data collection challenges has been to provide high levels of support to each partner in this early stage of data collection. For example, the Activity conducted on-site visits to SMEs to meet with accounting teams to work through the annual sales reporting and provided individualized worksheets to each financial institution. The MEL Team conducted the financial institution baseline surveys in tandem with a
62 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov technical team member to properly explain Nguriza Nshore activities and to build those initial partnership connections with financial institutions interested in receiving technical assistance.
COLLABORATING, LEARNING, AND ADAPTING
During FY 2019, Nguriza Nshore collaborated with local and international market actors. The Activity strengthened its internal collaboration through more regular pause-and-reflect sessions and planning workshops. In this first full year of implementation, Nguriza Nshore learned from internal and external sources and collected data and feedback from Activity partners. These lessons learned led to adaptations in the FY 2020 workplan and implementation approach. COLLABORATING
Encouraged Continuous External Collaboration
During this reporting year, Nguriza Nshore collaborated closely with other market actors, including the Government of Rwanda, the private sector and other donor-funded projects. Nguriza Nshore continuously collaborated with other development projects in Rwanda, sharing planned activities and experiences, mapped policy priorities through a collaborative process with MINICOM and built a partnership with the Angel Capital Association, Rwanda Banker’s Association and AMIR for future collaboration.
• Relationships and Networks – One of the enabling conditions of CLA is relationships and networks. During this reporting year, Nguriza Nshore built key partnerships based across the three Activity components. - Component 1 – Nguriza Nshore collaborated with the Rwanda Banker’s Association (RBA) and the Association of Microfinance Institutions in Rwanda (AMIR). These partnerships with umbrella organizations help Nguriza Nshore create synergies and to ensure what the Activity does is in line with national strategies. In the second quarter, Nguriza Nshore attended the RBA meeting with CEOs from all banks to present the Activity’s goals and opportunities to support financial institutions. In the fourth quarter, a concept note was developed with AMIR that outlines future collaboration to build the capacity of microfinance institutions and SACCOs in Rwanda. - Component 2 – Nguriza Nshore strengthened relationships between Rwandan SMEs and investor networks and associations. For example, the Activity became a member of the Angel Capital Association, the official industry alliance of over 14,000 angel investors. This membership gives Rwandan businesses exposure to the world’s largest network of angel investors for the first time. In the third quarter, four Rwandan SMEs attended the ACA Summit in Chicago and in the next reporting period two board members of the ACA will visit Rwanda to explore investment opportunities for the association’s members. - Component 3 – Nguriza Nshore spent FY 2019 building a strong relationship with the Activity’s line ministry, MINICOM. Furthermore, the Activity and MINICOM partnered closely during the EDP consultative data gathering and policy validation process. Nguriza Nshore and MINICOM conducted data collection in 18 districts
63 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov and held validation workshops with 363 stakeholders in all five provinces of Rwanda. The workshops included actors from the private and public sectors and civil society organizations. This policy validation process is disrupting how policies are developed in Rwanda by building support and momentum behind the policy with the involvement of diverse stakeholders. As Nguriza Nshore continues to partner closely with MINICOM and other government institutions on other policy work, there is an opportunity to influence the entire system of how policy is written in Rwanda. • Knowledge Management – Another one of the enabling conditions of CLA is knowledge management. During this reporting year, Nguriza Nshore brought together and met with a diverse range of stakeholders to share experience and expertise. In the first quarter of FY2019, Nguriza Nshore fostered new relationships with the other private-sector oriented USAID-funded projects – Private Sector Driving Agriculture Growth (PSDAG) and Hinga Weze. The three projects shared project updates, monitored any potential duplication in activities, created synergies and supported each other as the projects put systems in place to capture the new Feed the Future Global Food Security Strategy (GFSS) indicators. In the second quarter, Nguriza Nshore attended PSDAG’s lessons learned event and received due diligence information on their grantees to help Nguriza Nshore build on the work PSDAG previously did with SMEs in Rwanda. In the third quarter, Nguriza Nshore attended the Hinga Weze planning meeting and collaborated on SME pipelines with the Improving Market Systems for Agriculture in Rwanda (IMSAR) (DFID funded) and HortInvest Rwanda (Netherlands Embassy in Kigali funded).
Fostered a Culture of Internal Collaboration
The second sub-component of Collaborating is internal collaboration. To foster a culture of continuous learning and improvement, Nguriza Nshore improved internal team collaboration this year through regular team meetings, reflection workshops and planning sessions.
• Monthly Review and Planning Meetings – In the second quarter, in order to improve internal communication efficiencies and learning, Nguriza Nshore started conducting monthly review meetings. Each discussion consists of sharing lessons learned, challenges, and allots time to review the investment pipeline and progress towards targets for each indicator. In the next reporting period, FY 2020, Nguriza Nshore will allot time during these meetings to review work plan progress to date and to track market system changes as part of the Activity’s learning agenda. These meetings have improved internal communication and created a clearer process for reaching out to partners, thereby minimizing the burden on partners. • Quarterly Workshops – During this reporting year, Nguriza Nshore conducted quarterly reflection and learning workshops. These workshops consist of a series of participatory activities to encourage the Nguriza Nshore team to reflect on the progress and challenges of the last quarter, to adapt implementation strategy for the next quarter and to plan activities together. These workshops have been taking place outside of the office to allow participants to focus their time and energy on pausing and learning. These workshops foster knowledge management, institutional memory and also a culture of continuous learning and improvement.
64 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov
LEARNING
Learned from Investment Conferences and Investor Trips
During FY 2019, Nguriza Nshore attended two investor conferences and hosted two investor trips to Rwanda. These events provided opportunities for Nguriza Nshore to learn and improve performance in FY 2020.
• Investment Conferences – In the second quarter, Nguriza Nshore and nine Rwandan SMEs attended the Sankalp Summit in Nairobi, Kenya. Nguriza Nshore conducted reflection sessions every evening with participating firms and a debrief and lessons learned session at the end of the Summit. The organizing team reflected on ways to improve logistics and preparation for next time. The SMEs reflected on ways in which they want to improve their pitches and gain confidence in front of investors. They also shared about the technical knowledge they had gained by attending the sessions on company valuation, gender-lens investing, and private equity versus venture capital. Nguriza Nshore conducted follow-up discussions with the SMEs post-Sankalp to help prepare for the conferences and investor trips in future quarters. In the third quarter, Nguriza Nshore and five Rwandan SMEs attended the ACA Summit in Chicago, USA. Feedback from ACA included providing the entrepreneurs more background on the investors before arrival and discussion on how to breakdown stereotypical perceptions of Africa which prevent some investors from considering investing in African businesses. Overall, feedback from the ACA Summit was that entrepreneurs felt more comfortable pitching at ACA than they had been at Sankalp, only a few months prior. One entrepreneur wrote in the post-summit feedback form, “I was much better prepared for this ACA Summit than at Sankalp.” Another entrepreneur noted, “I was more prepared than at Sankalp. Our documents and pitch were ready and so it was easier to speak to potential investors.” Additional lessons learned at ACA and Sankalp came from peer-to-peer interactions. One entrepreneur said, “I learned about crowdfunding possibilities and strategies from a peer.” Others remarked about the learning opportunity to watch other businesses pitch in-front of live audiences. Entrepreneurs also appreciated the opportunity to share stories with other entrepreneurs about the challenges of growing a business and to share experiences on how they have overcome these obstacles, especially around access to finance.
Learning from the Sankalp Summit Experience During the Sankalp Summit reflection session, SMEs and Nguriza Nshore discussed the highs and lows of the conference. This was the first time that #RwandaRepresent at Sankalp and the group felt proud to be the vanguards in this regard. The SMEs felt supported by the on-site transaction advisors and noted this as one of the clear benefits of coming as a group as opposed to individually. The advisors were busy setting up meetings with investors during the conference and SMEs got exposure and practice pitching and “speed dating” with investors in the deal room. Nguriza Nshore created professional one-pagers for each SME, which the entrepreneurs said gave them extra confidence in presenting their businesses. For seven of the nine entrepreneurs, this was their first time at an international investment conference
65 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov and they grew their confidence levels in pitching and understanding the deal making process. Mark Mutaahi, the Regional Director of BiD Network remarked on the process by saying, “Prior to the pitch trainings and Sankalp, many of the entrepreneurs had challenges articulating their investment need concisely. In preparation for meeting both institutional and angel investors, they quickly mastered their unit economics, exit strategies and use of proceeds. As a result, these principles have become second nature to them and they have become more confident in engaging investors in one-on- one discussions.”
Top: Day 1 of the Sankalp Summit; Bottom: Post-summit group debrief and reflection • Investor Trips – The first investor trip took place in the second quarter of FY 2019. Nguriza Nshore collected feedback from the international investors. Their feedback included wanting to know more about the Rwandan investing climate and regulations and visiting sites outside of Kigali to get a better feel for the country as a whole. Nguriza Nshore partnered with Invest Africa US in the fourth quarter of FY 2019 to organize the first only women investors trip to Africa. Nguriza Nshore leveraged its past experience and managed the SME preparations, logistics and communications for the pitch event seamlessly.
Learned from Collected Data
During FY 2019, Nguriza Nshore conducted the Activity’s baseline data collection and data gathering for the EDP. Both data collection exercises helped Nguriza Nshore learn and adapt the year’s planned activities and processes. • Financial institutions baseline – During the third quarter, Nguriza Nshore completed the baseline survey with banks, MFIs and SACCOs. The comprehensive survey of the financial sector in Rwanda informed the Activity’s work with MFIs and banks in particular. The survey is also helping to ensure that Nguriza Nshore does not overlap with Hinga Weze to implement similar work with SACCOs.
• EDP data gathering – During the first quarter, Nguriza Nshore conducted data collection in 18 districts to feed into the EDP. The lessons learned from the EDP data collection directly impacted the EDP validations in the third quarter of FY 2019. The details of the changes are outlined in the “adapting” section below. ADAPTING
Nguriza Nshore Moved to a Market System Acceleration Approach
During FY 2019, Nguriza Nshore moved from a transaction-driven process to market system-level acceleration approach. The Activity learned key lessons from the end of Activity feedback on the East Africa Trade and Investment Hub Project and spent two quarters of FY 2019 focusing on ways in which the technical and operational implementation of Nguriza Nshore can foster market system change. In the fourth quarter of FY 2019, the Team participated in a Market System Development Project Simulation training, which influenced the FY 2020 work planning process.
66 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov What is Market System Development? Market system development is an approach that addresses the root causes of why markets often fail to meet the needs of excluded populations. Any market systems approach focuses on interventions that change incentives and amplify behaviors of businesses and other market players – public, private, formal, informal – to create lasting and sustainable change. According to Tatiana Pulido, a M&E Specialist with the Bureau for Food Security at USAID, “Directly supplying goods or services may help in the short term but ultimately creates an incentive structure that harms long term sustainability. It is about finding those leverage points — those people, companies, relationships, entrepreneurs — who, with a little help, can change the landscape of the market system and create a new, hopefully more efficient, market.”3
Inclusive market system development is the continuation of USAID’s evolution of thinking around private sector development. Market system development builds on and complements value chain development, rather than replacing it. According to a USAID brief entitled A Framework for Inclusive Market System Development, “Learning over time has revealed the need for an expanded model that expresses the wider context in which value chains operate. This wider context is essential because the goal of inclusive market development…aims to catalyze a process that results in a market system that is able to adapt as needed over time to deliver a sustainable flow of benefits to system actors, including the poor and otherwise disadvantaged or excluded.”4
Challenging the team to think differently and adapt practices after a training on market-systems development
In July 2019, the entire Nguriza Nshore team participated in a three-day interactive Market Systems Accelerator training, organized and conducted by EcoVentures International. The first day focused on input market systems and how a development project can empower and create efficiencies within the pre-harvest phase of the market. The second day focused on output buyer
market systems and support market systems. Nguriza Nshore learned how a project can use business tactics such as performance clubs, the media or ICT services to counterbalance and reinforce changes in the core market system. The third day covered supply chain management and the market systems change wheel, which was originally designed by the Feed the Future Agricultural Value Chain Activity.5
This in-person training was complemented by on- line modules. The 10 modules went into detail on various aspects of market-systems development, including sequencing of interventions, amplification
3 The full blog post about monitoring, evaluation and learning for market systems can be found here: https://www.agrilinks.org/post/form-follows-function-monitoring-evaluation-and-learning-market-systems 4 The full brief can be found here: https://www.marketlinks.org/library/framework-inclusive-market-system-development 5 More information on the Market Systems Change Wheel can be found here: https://www.agrilinks.org/post/agricultural- market-systems-behavior-change-wheel
67 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov of good practices, adaptive management, monitoring and evaluation of systems, and market facilitation.
The market system training has influenced the mindset of the technical, operations and MEL teams. Some of the key insights from the training were captured during the reflection portion of the online modules. A few of the learnings from Nguriza Nshore team members include:
“The key insight is about sustainability of development approaches so that these approaches reach the very poor and over a long period. At the heart of market systems is to ensure development reaches the very poor and in a sustainable manner.”
“I think as projects, we tend to think of ourselves as actors in the system and subsequently generate our own activities with our own staff and goals, but this [training] shifts our mindset from seeing us as one of the inside actors to being an outside party that can influence how change is spread.”
During the next reporting year, Nguriza Nshore will be applying a market-system lens to technical, operational and MEL work. In order to create lasting, system-level impact, Nguriza Nshore acknowledges the importance of this shift and is committed to learning and adapting during this key implementation change.
Financial Institution Baseline Data Informed Nguriza Nshore Work with MFIs and SACCOs
Nguriza Nshore used the financial institution baseline data to adapt the Activity’s planned interventions for MFIs and SACCOs. The Activity is working in collaboration with AMIR to design a set of capacity building opportunities for MFIs and SACCOs. Nguriza Nshore incorporated the feedback from financial institutions on previous technical assistance they received that did not provide practical skills or technical follow-up. The baseline also gave Nguriza Nshore a clearer idea of the state of the financial system in Rwanda, which will also allow us to track the Activity’s impact on the market system over time.
Adapted the EDP Validation Process
Lessons learned from the EDP data collection in the first quarter directly impacted the EDP validations in the third quarter of FY 2019. The validation workshops were conducted in Kinyarwanda and included a more diverse range of participants. The Activity purposively targeted traditionally underrepresented groups to attend the EDP validations. Female participation increased from 21% during the EDP data collection to 33% during the validation workshops. Youth
68 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov participation increased from 10% to 13% with National Youth Council representatives attending every workshop. Persons with disabilities increased from 0% to 6% with representatives from the National Council of Persons with Disabilities (NCPD) attending in all provinces.
Adjusted the Procurement and Contracting Process to Maintain High Quality Deliverables
During the reporting year, Nguriza Nshore received low quality responses to RFPs when advertising only in Rwanda. Nguriza Nshore responded in two ways: advertising RFPs in East Africa; and, working very closely with contracted individuals and firms to make sure that deliverables were of high quality. This will simultaneously increase competition in the market and also build the capacity of local human resources to respond competitively to such RFPs.
Onboarded New Transaction Advisory Firms
Since each SME partner is unique, Nguriza Nshore wants to make sure that the Activity has a range of transaction advisory firms to fit different needs. The Activity aims to crowd in investment to Rwanda and a lesson learned early in the reporting year is that this will require multiple advisory firms with various expertise and sector interests. In the third quarter of FY 2020, an RFP was released to recruit new advisory firms and the new advisory partners will be contracted in the next reporting period, FY 2020.
69 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov COMMUNICATIONS
HIGHLIGHTS AND SUCCESSES
Communications Support for Invest Africa US Women’s Investor Mission
The Nguriza Nshore Communications Team played a key role in making the partnership between Nguriza Nshore and the Invest Africa US Women’s Investor Mission a success. The Communications Team helped coordinate the pitch event that took place in partnership between Invest Africa US and Nguriza Nshore, ensuring proper branding and Activity visibility. In addition, the team helped to amplify the event by coordinating a radio show appearance with Nguriza Nshore staff and Sandrine Nzeukou, Executive Director of Invest Africa US on Royal FM’s Kigali in the Morning Show. Nguriza Nshore gained a great deal of traction on social media both during and after the event due to the high-profile nature of the Women’s Investor Mission.
Supporting SMEs to Develop Communications Materials for ACA
The Nguriza Nshore communications team worked directly with each of the four SMEs who attended ACA to develop top quality communications and marketing materials. This included materials such as: flyers, pull up banners, business cards, pitch decks, and short videos. It was key that the SMEs had visually appealing materials to present to investors at ACA in order to stand out from the other American companies at the conference. In addition, the communications team helped each SME improve the way they tell the story of their business in order to better engage the interest of investors. Overall feedback from ACA investors and the ACA board was that the Rwandan SMEs stood out and looked very professional and having these materials contributed to that positive image.
Communications Materials Developed for Sankalp Summit
In preparation for the Sankalp summit during the second quarter of FY 2019, the Communications Team supported the SMEs who attended the summit to develop key one-page flyers about their business. The Team worked with each SME to help them develop a clear and compelling way of telling the story of their business in just a couple of sentences. The one page flyer also included a snapshot of the SME’s annual revenue and investment need as well as a clear description of their social impact aligned with the UN Sustainable Development Goals. Many SMEs had some basic materials geared at their client market but had never developed language to describe their business or a compelling message directly targeted at potential international investors. They expressed appreciation for having this succinct and professional looking material to give to investors at Sankalp and felt that it helped them to make a good initial impression with investors which created opportunities for further conversation. In addition, the flyers included a brief section about Nguriza Nshore and our work with SMEs which further raised awareness about the project and our impact in Rwanda.
Communications Support for March Investor Trip
The Communications Team provided a significant logistical and event planning support for the Investor Trip during the second quarter of FY 2019. The Communications Team ensured that the
70 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov investors were properly taken care of and received key materials explaining the nature of Nguriza Nshore and an overview of the broader investment and entrepreneurship environment in Rwanda. In addition, the Team supported the planning and day-of logistics for the very successful Deal Making event as well as the six SME visits that occurred during the three-day trip. During the site visits and events, a photographer and videographer accompanied the team, taking high quality photos and videos both for the project as well as gathering shots for the SMEs to use on their individual marketing materials, a major need realized at Sankalp. The video will be developed into a short promotional film encouraging others to invest in Rwanda and will be used to attract other investors to the country in the future.
CNBC Africa Interviews
During the second quarter of FY 2019, CNBC Africa did a story covering Nguriza Nshore and the Activity’s impact in Rwanda. The interviews were done in February at Ambassador Vrooman’s residence as part of an event to welcome the SMEs who attended Sankalp back and celebrate their accomplishments. Three interviews of the story were aired: an interview with Ambassador Vrooman, an interview with Olivia Zank, CEO of BeneFactors, and an interview with Mohammad Khaled, Managing Director of Chillington. The communications team supported the SMEs in preparing for the interviews as well as the event, ensuring that Nguriza Nshore was correctly described in compliance with FtF guidelines.
Success Story Collection and Field Visits
During the second and fourth quarters of FY 2019, the communications team joined the M&E team in site visits to Musanze where they visited Zamura Feeds, Kigali Farms, Hollanda FairFoods, EasyHatch and Agasaro Organics. The visits were critical as it helped the Communications Team to better understand how the Technical Team supports SME partners. The Team interviewed the SME owners as well as beneficiaries of their social enterprises in order to build out success stories.
Website Development
During FY 2019, Nguriza Nshore developed an Activity website under the domain www.ngurizanshore.rw and worked with an external web developer to create a website that adheres to FtF branding rules and regulations and also provides pertinent information and updates about the project. The website also has an “apply” page with an embedded Google form for SMEs to easily apply for pre-investment support.
Social Media
Throughout FY 2019, Nguriza Nshore posted regularly and engaged with followers on the Twitter and Facebook platforms. The Activity gained notable traction particularly around key events like Sankalp, ACA, the Invest Africa US event, and Feed the Future week.
Development of New Marketing Materials
During FY 2019, Nguriza Nshore developed several new communications materials to respond to some of the most frequently asked questions. First, the team developed a process flowchart to visualize the standardized process for each type of stakeholder – financial institutions, SMEs, and
71 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov government entities. Secondly, the team developed a frequently asked questions one-pager that demystifies some of the most common questions around project objectives and modes of technical assistance.
72 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov OPERATIONS AND ADMINISTRATIVE ACTIVITIES
DEVELOPMENT OF KEY DELIVERABLES FOR USAID
DEC Submission DEC URL Deliverable Name Submission Date Status Date
https://dec.usaid.go v/dec/content/Detail _Presto.aspx?vID= FY18 Annual Report October 30, 2018 Approved January 16, 2019 47&ctID=ODVhZjk4 NWQtM2YyMi00Yj RmLTkxNjktZTcxMj M2NDBmY2Uy&rID =NTE1OTc3 https://dec.usaid.go v/dec/content/Detail Quarterly Report FY19 – .aspx?vID=47&ctID January 30, 2019 Approved July 24, 2019 Quarter 1 =ODVhZjk4NWQtM 2YyMi00YjRmLTkx NjktZTcxMjM2NDB mY2Uy&rID=NTIzM https://dec.usaid.gozAw v/dec/content/Detail .aspx?vID=47&ctID Quarterly Report FY19 – April 30, 2019 Approved October 25, 2019 =ODVhZjk4NWQtM Quarter 2 2YyMi00YjRmLTkx NjktZTcxMjM2NDB mY2Uy&rID=NTUy Mzk1 https://dec.usaid.go v/dec/content/Detail Quarterly Report FY19 – .aspx?vID=47&ctID July 30, 2019 Approved October 24, 2019 Quarter 3 =ODVhZjk4NWQtM 2YyMi00YjRmLTkx NjktZTcxMjM2NDB mY2Uy&rID=NTUy Yr 3 Work Plan September 18, 2019 Submitted Mzg5
Monitoring, Learning and July 2, 2019 Submitted Evaluation Plan (LOP) Baseline Report, Revised June 4, 2019 Submitted
73 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov ANNEXES
ENVIRONMENTAL COMPLIANCE
Per direction from Nguriza Nshore’s Contracting Officer’s Representative (COR), Nguriza Nshore will prepare an environmental mitigation and monitoring plan (EMMP) early in Year 3. Nguriza Nshore’s home office-based Project Team Director, Christian Ellwood, will travel to Kigali in Q1 of Y3 to consult with the COR regarding the way forward for the EMMP. SUCCESS STORIES
Empowering SMEs to Have Greater Social Impact
Solange is the owner of Gracia restaurant in Kigali which operates from a major hospital, daily serving numerous staff, patients, and neighboring clients. One of the main challenges she has regularly faced in running her business is a lack of access to running capital. “Sometimes we are paid per month and must have some money to invest in our business because we need to buy different things every day,”6 Gracia shared. This is a barrier many SMEs in Rwanda as many buyers can take 30 – 90 days to pay out invoices. And without regular access to working capital, many SMEs are not able to improve or expand their businesses, and far too many are forced to close down. This is where invoice financing provides an innovative solution. Invoice financing, also known as invoice factoring, is a critical alternative financing mechanism that solves the cash flow deficit challenge SMEs face, through which an invoice financing company buys an SME’s outstanding invoice and within a couple of days provides them the cash they need to continue operating in the meantime. BeneFactors is an invoice financing company in Rwanda which provides these services to SMEs. Nguriza Nshore has been working with BeneFactors throughout FY 2019, providing them with investment readiness support and helping them to secure investment. One type of support Nguriza Nshore gave BeneFactors was to give the company a $100,000 grant which it in turn used to finance SMEs in its pipeline. The grant provided by Nguriza Nshore established a proof-of-concept and allowed BeneFactors to break through the “too small” for private capital barrier thereby creating the conditions for the company to access commercial credit lines and investment from venture capitalists, angel investors and high-net worth individuals. Since the grant was disbursed to BeneFactors in mid-2019, the company raised over $900,000 and created the condition for a successful Series A fundraise of over $2 million in 2020. With increased investment, BeneFactors is going to be able to increase the SMEs in its pipeline, with an ever-growing list of SMEs waiting to receive its services. For BeneFactors Founder and CEO, Olivia Bryanne Zank, a major motivation for her work is the social impact she sees BeneFactors is having on other Rwandan SMEs.
6 Quotes from Solange taken from this video shared with permission by BeneFactors
74 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov
Olivia Bryanne Zank pitches BeneFactors to investors during Nguriza Nshore March Investors Trip
“For us, having an impact means creating more jobs and stabilizing those that already exist. Our services offer cash flow stability to small and medium-sized enterprises that risk going bankrupt due to liquidity issues. There are millions of jobs in such companies that we help stabilize and create more by giving the owners/managers time to breathe and focus on growth. We’ve seen a lot of our clients growing tenfold within the first year of using our services. Having more working capital means lower transaction costs, higher turnover and higher utilization of their existing capacity. This translates into jobs for people and communities that really need them,”7 Olivia shared. Solange shared this sentiment: “working with BeneFactors helped me so much because they gave me working capital that covers the time I am waiting to be paid, as I am paid after 1 month for a pending invoice. They helped me and I really appreciate working with them.” BeneFactors’ goals for serving more SMEs in Rwanda and the continent are high. “In Rwanda alone, we have estimated that the unmet demand for B2B working capital amongst SMEs is some $325m USD. Add to that other forms of working capital such as overdrafts, inventory financing, merchant cash advances, distributor financing, etc., and you have a market in the billions of USD in one of the smallest African economies alone.”8 Nguriza Nshore is continuing to empower SMEs like BeneFactors to access the financing they need so they can have greater social impact, employ more people, and contribute to creating a self- resilient Rwanda.
7 From this LinkedIn post by Olivia Bryanne Zank shared with permission by BeneFactors 8 Also from LinkedIn post by Olivia Bryanne Zank
75 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Amplifying Youth and Women’s Voices in the Policy Development Process
Odette is a relentless woman entrepreneur from Musanze district in northern Rwanda. Her focus is agribusiness, selling fertilizer and improved potato and maize seeds. In the first three years since she started her business, she has managed to open four shops and works with farmers across Musanze to make sure they get top quality supplies on time. Despite her success as an entrepreneur thus far, Odette admits she and other entrepreneurs like her face many challenges in running their businesses. First, accessing the finance she needs to run her business remains a constant gap. “Accessing finance is a challenge for me; I feel as though I have no support from anywhere. Finding capital to start a business is really hard and accessing finance in the agriculture sector remains an even bigger challenge as there is no insurance,” Odette shared. A second challenge that Odette expressed is that “the government changes policies and procedures a lot without informing us and we find ourselves penalized because of this.” Odette also struggles to hire the right talent in her business because agriculture has such a negative reputation among youth.
Women participate in EDP validation workshop
Odette was invited to attend a validation workshop of the EDP focused specifically on women and youth representatives, organized by Nguriza Nshore in partnership with MINICOM. She feels optimistic about the EDP because it promises to address many of the challenges she personally faces as an entrepreneur. Financing as well as human capital and management are two of the key pillars of the EDP and are designed to address the exact gaps and barriers that Odette expressed she faces on a daily basis. Another key implementation goal of the EDP is to develop an entrepreneurship portal and a targeted communications strategy to counter the challenge Odette faces of lacking access to the right information which directly impacts her business. Odette also has confidence in the EDP, because she, and other women entrepreneurs like her, were directly involved in the policy development process. “Being involved in this policy development
76 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov strengthens me. When I hear all the information provided, it shows me that the problems I face will be solved.” It’s the first time Odette has ever participated in the development of a policy which she attributes to the fact that most policy makers don’t know the right people to involve in the policy development process, most importantly those who the policy directly affects. “The EDP is something large because entrepreneurship is both an art and a science. If you are lacking on one side, you will not succeed. And the EDP captures these linking pieces – i.e. having money is not enough if you do not have the right skills and knowledge,” Odette expressed. As Odette concluded, “we as entrepreneurs need to be empowered” and the EDP is a step in the right direction to ensure that Odette and other entrepreneurs like are able to succeed and expand.
77 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov RWANDA NGURIZA NSHORE PERFORMANCE INDICATORS
Reporting Activity FY19 Annual Percent Life of Indicator Quarterly Progress frequency IR Cumulative Target Achieved Activity FY199 Target FY19 FY19 FY19 FY19 Q4 Q1 – Q4 FY19 % Value Q1 Q2 Q3 1. EG.3.2-27 Value of agriculture-related Bi-annual Goal - 50,292 - 1,202,669 USD 1,252,961 USD 1,200,000 104% 15,000,000 financing accessed as a result of USG USD assistance [IM-Level] 2. Number of jobs created with USG Bi-annual Goal - 383 - 1,544 1,927 2,597 74% 30,000 assistance (Custom) 3. EG.3.1-14 Value of new USG commitments and private sector investment leveraged by 593,533 Bi-annual Goal - - 1,081,778 USD 1,675,311 USD 3,000,000 56% 30,000,000 the USG to support food security and USD nutrition [IM-Level]
1.1 Value of loans leveraged using de-risking Bi-annual IR 1 - 0 USD - 690,888 USD 690,888 USD 180,000 668% 5,900,000 tools (Custom) 1.2 Number of financial and non-financial institutions receiving USG assistance that Bi-annual IR 1 - 2 - 31 33 32 103% 198 extended loans and other financial products to SMEs (Custom) + 20% increase 2.1 EG.3.2-26 Value of annual sales of firms Baseline Annual IR 2 - - - - 5,119,721 USD 100% over baseline and farms receiving USG assistance [IM-Level] value (B.V.) value
2.2 Percentage of firms receiving direct + 10% increase Baseline support by the Activity that report being able Annual IR 2 - - - - 50% 100% over baseline value (B.V.) to recruit more labor as a result of investment value (Custom) 2.3 Number of firms receiving USG-funded technical assistance for improving business Quarterly IR 2 70 19 22 6 117 100 117% 500 performance (Custom) 3.1 EG.3.1-d Number of milestones in improved institutional architecture for food Annual IR 3 - - - - 19 8 238% 54 security policy achieved with USG support [Multi-Level]
9 This percentage is calculated by dividing the FY 2019 actual by the FY 2019 target.
78 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov Reporting Activity FY19 Annual Percent Life of Indicator Quarterly Progress frequency IR Cumulative Target Achieved Activity FY199 Target EG.3-e Percent change in value-added in the 4,114,740,000 Every 3 years Context 4,114,740,000 USD N/A N/A N/A agriculture and food system (“Ag GDP+”) USD [National level] GFSS Policy Matrix Progress Score [National Annual Context N/A N/A N/A N/A level] EG.3-g Employment in the agri-food system Every 3 years Context 3,419,000 3,419,000 N/A N/A N/A [National level]
79 | RWANDA NGURIZA NSHORE | ANNUAL REPORT FY 2019 feedthefuture.gov