Supporting local companies
in the aftermath of Covid-19

Small, hilly and landlocked, Rwanda is home to about 13.2 million people. The country aspires to become a middle-income country by 2035. Its economy grew more than 7 per cent on average over the decade to 2019, and its gross domestic product (GDP) per capita grew 5 per cent annually. Yet, this positive trend is fragile. In 2020, its GDP fell by 3.4 per cent, marking Rwanda’s first recession since 1994. Many companies were at risk of shutting down or reducing jobs. Lockdowns and other public measures to control the Covid-19 pandemic troubled Rwandan companies, which are predominantly informal micro and small enterprises. Such enterprises account for 91 per cent of all companies in Rwanda. Even though they commonly only employ three employees or less, they are essential for the country’s overall employment. Just under eight per cent of all Rwandans are employed in the 15,800 formally registered companies. To create more and better jobs for Rwanda’s growing population, micro and small enterprises need to grow.

Kigali is Rwanda’s capital and its economic epicentre. 45 per cent of Rwanda’s companies are based there, offering jobs for urban dwellers. Consequently, increasing numbers of rural migrants are seeking job opportunities in Kigali. To enhance access to jobs also for Rwanda’s rural population, which tends to be at a higher risk of poverty, companies outside of Kigali and other major cities require targeted support.

Matching grants and trainings for rural Rwandan companies to manage business challenges related to the Covid-19 pandemic

For micro, small and medium-sized enterprises (MSMEs) in rural Rwanda to expand their business and thus create more and better jobs, Invest for Jobs supported the third round of the Local Competitiveness Facility (LCF) of the Local Administrative Entities Development Agency (LODA). LODA is a government agency under supervision of the Ministry of Local Government (MINALOC). It focuses on local economic development, social protection, and capacity building of local administrative entities.

The goal of the LCF is to facilitate business partnerships for pro-poor local economic development through the integration of smaller, often informal enterprises into local value chains. The LCF combines matching grants between 3,000 to 30,000 Euro disbursed in Rwandan Franc with complementary business development services to enhance the business skills of participating MSMEs. The business development services include, for instance, financial management trainings conducted for all business partnerships at the level of each district, thus also enabling companies to meet and exchange with their peer LCF beneficiaries.

The LCF application process was designed to be transparent and competitive. Starting in December 2020, a public call for proposals in nine Rwandan districts sparked the interest of private companies. The districts were: Burera, Gatsibo, Gisagara, Huye, Karongi, Kirehe, Nyamagabe, Nyamasheke, and Rulindo. To apply, companies formed business partnerships with other companies along specific value chains, usually combining formal, larger companies with informal, micro enterprises. Non-governmental organisations and technical and vocational education and training (TVET) institutions were eligible partners as well. All proposed business partnerships had to have high potential to generate a lasting economic impact to contribute to the economic growth of their respective district.

For example, a new business partnership in remote Kirehe district involved a bee-keeping cooperative and a honey-processing company. The LCF matched the partnership’s funds for them to acquire machinery and equipment to produce more and better honey. Just like all other partnerships, they received complementary trainings to foster business development.

Approved by a public selection committee in July 2021, the LCF supported in total 76 business partnerships until April 2023, comprising 119 small and medium-sized enterprises (SMEs), 34 cooperatives, and two TVET institutions across the nine districts. Most of the partnerships operated in agro-processing, tourism, and manufacturing. Only 29 per cent of the companies had savings on a bank account and less than 13 per cent owned buildings or land – testifying their need for LCF support.

This round of the LCF, supported by Invest for Jobs, achieved remarkable impact. First and foremost, 73 of the 76 partnerships had not existed before. In total, Invest for Jobs provided around 1.35 million Euro in public grants that were forwarded through the districts to each business partnership and matched with an equivalent of 0.53 million Euro in private contributions.

By the end of this third round of the LCF, each company had stayed in business despite the economic hardships following the Covid-19 pandemic. Notably, 95 per cent of the companies introduced at least one new product or service, 74 per cent gained access to new markets, 90 per cent increased their turnover, and 39 enterprises formally registered. As a result, with support of Invest for Jobs, the companies retained 1,356 of their employees, more than 91 per cent of their initial workforce. 802 of them are women and 163 youths younger than 25. Moreover, after the pandemic, 384 people newly came into good employment, including 155 women and 57 youths. 14.5 per cent of the newly hired employees were trained in the TVET institutions supported within the third LCF round. From the initial employees, 1,145 confirmed improvements of their working conditions.

The Local Competitiveness Facility by the Local Administrative Entities Development Agency (LODA) was supported by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH in the context of the Special Initiative "Decent Work for a Just Transition" on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ). In addition, the LCF was supported by the project “Economic Inclusion of Refugees and Host Communities” which is implemented by GIZ and funded by BMZ’s Special Initiative “Displaced Persons and Host Countries” as well as the European Union.