RSSB to launch Rwf30bn equity investment facility for SMEs

Rwanda Social Security Board (RSSB) is set to launch a Rwf30 billion equity investment facility for Small and Medium Enterprises (SMEs) in a move to address the financing gap to growth and scalability.

The development was announced by Regis Rugemanshuro, the chief executive of RSSB, who indicated that the proposed Fund will be domiciled and operate in Rwanda. He said the target is to launch it before the end of 2024.

“If we were only looking for returns, there are many funds that are already doing that,” he said, noting that RSSB seeks to create impact by being an anchor investor and attracting de-risking facilities for different businesses.

The country’s largest pension and investment Fund has Rwf2.065 trillion in Assets Under Management at the end of financial year 2022/2023.

Its net return on investment totaled to Rwf109.6 billion in the same period from more than 30 equity investments across major companies such as Akagera Medicines, Safaricom, Ultimate Forests Company, MTN Rwanda, Bank of Kigali, Trade and Development Bank (TDB), and Kenya Commercial Bank, to mention but a few.

Louise Kanyonga, Deputy CEO of RSSB, told The New Times that the facility will come to address the imbalance in the market caused by conventional financing instruments that hinder the growth of domestic private sector due to limited access to capital.

“Traditional type of financing simply doesn’t work for SMEs mainly because of high interest rates payable in short-term which is very difficult for a small business to make returns that can service the loans, not to mention the need for collateral,” she said, adding that SME businesses need patient capital providers to walk the journey with them.

Kanyonga highlighted that there is a need for different types of capital facilities that can enable SMEs growth such as venture capital for early-stage financing that is patient and has no stringent collateral requirements.

“As RSSB, our funding comes from an everyday Rwandan, we have a much more responsibility to feed back into community. The idea is to take some of the resources we have and address that issue,” she noted

Kanyonga also mentioned that the fund will have different partners on board who, besides investing in these businesses, will offer business advisory services to ensure that SMEs succeed.

According to RSSB, the company plans to exit the private ventures after a period of 10 years, and the businesses to be eligible to access the new facility, will have to undergo an accelerator programme.

Papy Biganza, Co-founder of Afia Group which operates an online pharmacy, said that access to funding is often a significant challenge for SMEs, and that this initiative could help level the playing field and foster a more dynamic entrepreneurial ecosystem.

“It is actually very good news. This injection of capital could provide the much-needed financial support for SMEs like ours to expand operations, invest in technology, and scale our businesses,” he noted.

During the 2022/2023 financial year, RSSB also invested Rwf40 billion in three new companies –Zipline, Katapult Africa, and East African Breweries (EABL).

The move comes at a time when Business Development Fund (BDF) canceled its equity investment scheme for SMEs in September 2022, stating that this form of financing was not performing well.

It had invested over Rwf1.9 billion through quasi equity loans from 2012-2021, but over Rwf1.6 billion, or 85 per cent of the total amounts disbursed, had not been recovered at the time it was audited in the financial year 2020-2021.

RSSB, along with Qatar Investment Authority, is an anchor investor in Virunga Africa Fund, a $250 million venture capital fund currently managed by Admaius Capital Partners.








Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.