Efforts by the Government of Rwanda to increase access to finance for businesses affected by the COVID-19 pandemic and build post-pandemic economic resilience received a boost after approval of a USD100-million loan from the Asian Infrastructure Investment Bank (AIIB). The project is AIIB’s first engagement in the east African country since it became a member in 2019 and marks the Bank’s first investment in sub-Saharan Africa.
With many critical sectors stifled because of measures put in place to contain the spread of the virus, Rwanda’s GDP fell by 12.4 percent and 3.6 percent year-on-year in the second and third quarters of 2020, respectively, with annual GDP in 2020 declining by 3.4 percent, ushering the first recession in more than two decades.
The economic fallout has been particularly challenging for micro, small and medium enterprises (MSMEs) which constitute 98 percent of businesses in the formal sector, and 72 percent of employment. Employment has fallen sharply with joblessness reaching its highest point since 2016, at 22.1 percent in May 2020.
“The COVID-19 crisis has heightened economic uncertainty and resulted in a large decline in private-sector investment. New business investment is needed to ensure Rwanda’s economy is well-positioned to not just survive the economic effects of the pandemic but recover and regain a path to resilient growth. The AIIB loan, which will finance sub-loans to businesses for investments that contribute to job creation, recovery and sustainable growth, demonstrates the Bank’s relevance and value to its nonregional members during a time of severe crisis and need,” said AIIB Infrastructure Sector Economist, Suzanne Shaw.
It is expected that at least half the total volume of the investment credit line will go to the SME sector, and at least 35 percent of sub-loans will go to women-owned and/or managed firms. Under the project, businesses will also benefit from risk-sharing schemes, and technical assistance will be provided to strengthen their ability to access finance and sustain their growth beyond the life of the project.
Co-financed with the World Bank, the project is supported under AIIB’s COVID-19 Crisis Recovery Facility and will provide financial support to the government’s own Economic Recovery Fund, a fund created to support businesses most significantly affected by COVID-19 in Rwanda.
The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank whose mission is financing the Infrastructure for Tomorrow—infrastructure with sustainability at its core. We began operations in Beijing in January 2016 and have since grown to 103 approved members worldwide. We are capitalized at USD100 billion and Triple-A-rated by the major international credit rating agencies. Working with partners, AIIB meets clients’ needs by unlocking new capital and investing in infrastructure that is green, technology-enabled and promotes regional connectivity.