UvA-DARE (Digital Academic Repository) Remittance inflows ... · 4.0 Remittance Inflows to SSA Countries and Case Selection of Rwanda In recent years, the world has witnessed increasingly

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Remittance inflows and economic development in Rwanda

Kadozi, E.

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Citation for published version (APA):Kadozi, E. (2019). Remittance inflows and economic development in Rwanda.

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CHAPTER FOUR

This chapter presents the facts and trends of remittance inflows on a global, SSA regional,

and Rwanda country level. Its purpose is to demonstrate the background of this study. The

chapter provides in-depth facts about Rwanda in relation to remittances and development in

the country. These facts motivate the selection of Rwanda as a case study. Different trends of

remittance inflows and other external inflows to SSA countries are reviewed. Trends of

remittance inflows and other external inflows, as well as facts about the macroeconomic

implications of remittances in Rwanda are presented. Different policies, including policies

aimed at creating a conducive environment for diaspora engagement in national development,

are reviewed. How this institutional and policy framework was implemented and how it

positively influenced remittance-development outcomes in Rwanda is also discussed. In

support of the latter, anecdotes from my personal professional experience working with the

diaspora, different diaspora members, and beneficiaries in Rwanda are also presented. This

establishes the background motivating the rationale for the selection of Rwanda as the best

case to examine the impact of remittances on development outcomes.

4.0 Remittance Inflows to SSA Countries and Case Selection of Rwanda In recent years, the world has witnessed increasingly high rates of emigration and a surge

in inflows of remittances to developing countries. These two interlinked development

phenomena have attracted growing attention of policy makers and scholars about the intrinsic

role of remittances in development. Over the last three decades, remittance inflows to

developing countries have increased exponentially (21 times), from US$20 billion in 1980 to

$436 billion in 2014, but during the same period remittances to Sub-Saharan Africa only

increased moderately, from US$18 billion to US$ 34.5 billion (see Migration and Remittance

Factbook, 2016). Sub-Saharan Africa’s share of total remittance inflows to developing

countries has decreased during the same period. Rwanda, on the other hand, experienced a 38

fold increase in remittance inflows. Remittance inflows to Rwanda increased from

$3,381,209 in 1980 to $128,172,555 in 2014, demonstrating an exponential growth trend.

Figure 4. 2 below shows the remittance inflows to developing countries, while Figure 4. 3

shows the remittance inflows to the SSA region. Trends in the two figures indicate a steady

growth trend of remittances over the years.


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Figure 4. 2: Remittance Inflows to Developing Countries Versus Other External Capital Inflows, from 1990-2014 in Billion US$

Source: Development Indicators Group, World Bank, Migration & Remittance FactBook, 2016,

3rd Edition

Figure 4. 3: Growth Trends of External Capital Inflows to SSA Countries, from

1980-2014 in Billion US$

Source: Data from the World Bank and Quality of Government Datasets

The two figures illustrate that remittance inflows to developing countries, and SSA

countries in particular, have maintained steady upward growth trends compared to other

external capital inflows. In general, the growth trend of official development aid to

developing countries has remained low over the last three decades, but in the SSA region this

1617

1819

2021

1980 1990 2000 2010 2020country year

Remittances FDINet-ODA

Ext

erna

l Cap

ital i

n B

illio

ns U

S$


89

has been high compared to other external capital inflows. This can be attributed to the

political and economic fragility still affecting the region in general. Similar growth trends are

also observed in Rwanda. Rwanda registered steeper growth trends of remittance inflows in

relation to other external capital inflows in recent years.

Figure 4. 4: Growth Trends of Remittance Inflows to Rwanda, 1980-2014 (US$ millions)

Source: Data from World Bank dataset

In recent decades, remittance inflows to Rwanda have increased exponentially. According

to the World Bank Development Indicators(2014), personal remittances inflows to Rwanda

increased from $3,381,209 in 1980 to $128,172,555 in 2014. Subjected to GDP, the two

variables (remittances and GDP per capita) share similar growth trends, as illustrated in the

Figure 4. 5 below. The only difference is observed in 1994 and the subsequent few years

when Rwanda was experiencing political turmoil and the genocide against the Tutsi.

Obviously, this crisis affected the Rwandan economy, but it did encourage more remittance

inflows. This is due to the fact that, like official development assistance (ODA), remittances

respond to political and economic crises in the country of origin to meet humanitarian needs.

The only difference between ODA and remittance inflows is that remittances respond to

humanitarian needs, but also to the development factors and economic opportunities in the

country of origin. When the economy is doing well, this presents opportunities for productive

use of remittances, but institutions and policies also need to be developmentally friendly.

050

100

150

200

1980 1990 2000 2010 2020Rwanda


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Subjected to GDP, the percentage of remittances to GDP increased from 0.269% in 1980 to

1.62 4% in 2013. Figure 4. 5 shows similar growth trends of GDP per capita and remittance

inflows to Rwanda between 1980-2014, except in 1994 which is attributed to the effect of the

genocide against the Tutsi. This confirms the existing claims in the scholarship that

remittances increase during hard times such as wars, natural disasters like droughts, and

economic setbacks to act as a buffer and source of income to the recipient households.

Figure 4. 5: Growth Trends of GDP per Capita against Remittance Inflows in Rwanda, 1980-2014

Source: Data from World Bank dataset

Figure 4. 6: Growth Trends (%) of External Capital Flows to GDP per Capita in Rwanda

Source: Data from World Bank and Quality of Government datasets

55.

56

6.5

GD

P p

er c

apita

1415

1617

1819

1980 1990 2000 2010 2020country year

Remittances GDP per capita

01

23

45

1980 1990 2000 2010 2020Rwanda

Net-ODA % GDP Remittances % GDPFDI%GDP

Perc

enta

ge o

f GD

P


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As depicted in Figure 4. 6, in Rwanda, like in the other SSA countries, official

development assistance still takes the lion’s share of external financial inflows. This is

demonstrated by the growth trend of official development aid percentage to GDP per capita

in Rwanda. Foreign direct investments and remittances share similar growth trends in terms

of their percentage to GDP per capita. These trends depict Rwanda’s political and economic

development path. The first steep upward trends of official development (Net-ODA)

assistance and remittances to GDP are attributed to the effects of the genocide against the

Tutsis in 1994. Another upward trend of remittances surpassing FDI was experienced

between 2008 and 2012 because of the effects of the global economic and financial crisis.

During the global financial crisis, global FDI inflows were affected, but remittance trends

continued to increase.

Despite the continued impressive growth of remittances, the development potential of

remittances has continued to be a subject of debate among scholars and policy makers. The

underlying question is whether remittances to developing countries contribute to

development outcomes. Many studies examine the effect of remittances on economic growth

and poverty. Nevertheless, the findings of these empirical studies continue to be inconclusive.

This can be attributed to the theoretical, conceptual, empirical and methodological issues that

affect the field. To the best of my knowledge, there is no study that has approached the

development impact of remittances in the receiving country comprehensively, by addressing

the macro and micro impact of remittances and the conditional role of the prevailing

institutional and development factors in the recipient country. Most studies on this topic

approach the remittance-development impact either at the macro or the micro level, based on

the macroeconomic indicators at the country or cross-country level. The role of the

institutional and policy environment and the contextual aspect remain ignored in these

studies’ theoretical and empirical frameworks. Particularly, the causal path between

remittances, the institutional and policy environment and the overall development outcomes,

as well as the contextual aspect, have been largely underestimated both theoretically and

empirically. This is a contributing factor to the ongoing inconclusive empirical debate in the

field.

Remittances are private financial and in-kind transfers from migrants abroad to a recipient

person/household for socioeconomic use determined by the institutional environment and the

underlying motivation to remit. Thus, their effect can be evidenced at both the micro

(household) and the macro level. Like other international external capital inflows, however,

the conditional role of local institutions and the policy environment mediates the growth and


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development effect of these inflows. In this regards, SSA countries have varying levels of

development and differing institutional environments, which affects the remittance-

development impact within and across the region. There is a growing trend in the literature to

underestimate the role of institutional and development factors and their variations between

countries. A country’s institutional and economic context matters in terms of attracting and

deploying remittances for economic development. Moreover, the application of these factors

is not one size fits all across SSA countries.

In consideration of the above empirical gaps, this study contributes to this body of

knowledge by examining the development impact of remittances in SSA countries and

Rwanda in particular. The SSA countries are an interesting and relevant case for such a study.

Over the last three decades, the region has witnessed increased remittance inflows, which is

hypothesized to have affected development in the region. This assumption is contested by the

underlying institutional and development factors that may be affecting the way these inflows

are contributing to development in the region. The structural and institutional challenges

existing in the region might overshadow the development impact of these inflows in the

region. This is also coupled with the lack of reliable data that stops scholars from venturing

into this field. The findings about the remittance-development impact in the SSA region can

increase our understanding about the development impact of remittances at the cross-country

level.

At the country level, Rwanda presents an important case to contextualize the analysis of

this study. Rwanda is an interesting case study in the context of the remittance and

development discourse. This is because of the history of the country and the recent

impressive progress in development, evidenced in the development outcomes and in the

recommendable progress in the effective institutional and policy environment. Rwanda is a

small landlocked country with no natural resources, characterized by decades of divisive

politics and political instabilities. The country experienced significant political conflicts that

culminated in the genocide against the Tutsi in 1994 and, before and during the genocide, the

emigration of Rwandans to neighboring regions and far abroad. Not only human lives were

lost (estimated at one million Rwandans), but also all institutions. As a result, Rwandans

(including those in the diaspora) lost their dignity and their trust in their government and state

institutions. However, the recent observed progress in development, together with the

recommendable progress in institutional and policy effectiveness and the availability of

comprehensive data enable us to investigate the development impact of remittances in the


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country. These factors qualify Rwanda as a case for this study. The next section discusses the

rationale for selecting Rwanda in detail.

4.1 The Case Selection of Rwanda The selection of Rwanda as a case study was motivated by different factors. The following

anecdotes establish the background and the rationale for selection of Rwanda as the best case

to examine the impact of remittances on development outcomes. These anecdotes are based

on my professional experience working with the Rwandan Diaspora and the Government of

Rwanda at the Ministry of Foreign Affairs and Cooperation of Rwanda from 2008-2011.

They capture my personal interactions with different Rwandan Diaspora members, students,

and Government officials in different periods and on different occasions. Any error is, of

course, my responsibility rather than that of anybody or any institution. These anecdotes

provide evidence of the development implications of remittances.

Since immediately after the genocide, one of the mandates of the Rwanda Ministry of

Foreign Affairs and Cooperation has been to engage the Rwandan Diaspora and to create a

conducive environment for the Diaspora to contribute to development in Rwanda. While my

colleagues and I we were working on the implementation of this policy, I observed that

people (including technocrats) had mixed views about the positive role of the diaspora in

Rwanda’s development path. Colleagues would tell me that, “with all the efforts and budget

you are investing in these activities do you really expect any developments from the

diaspora?” The other side of this coin was however pressure from the diaspora demanding

facilitations to contribute to Rwanda’s development, for the Government to create conducive

mechanisms to transfer their resources back home. Every day we would receive complaints

from the diaspora requesting that the Government facilitate them in repatriating their

resources (financial, knowledge, business and investments) back home. This was not only an

issue in Rwanda, when I met colleagues from other SSA countries, they expressed similar

experiences. And some time the issue could be politicized, with the underlying question, does

the diaspora really want to contribute to development back home? After all, we do not see

their money. This was associated with the institutional delivery mechanism and historical

perceptions towards the diaspora.

Some years later, we began to experience a shift in the public attitude and opinions

towards the diaspora, from pessimistic to optimistic. This was mostly driven by two factors;

First, the strong policy and outreach programs targeting the diaspora by the Rwandan

Government and Second, the positive feedback from the Rwandan Diaspora who were


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becoming more interested in repatriating their resources back home. As result, we started

receiving interest from other people (from the government, the private sector and NGOs) in

the diaspora’s contributions to development back home. It is in this context that we received

two students (who prefer to remain anonymous) who were doing their internship at the

ministry. They came in different time periods and were interested in doing their internship

under the Directorate of the Diaspora. While discussing options with them, my first question

was “why are you interested doing an internship in this directorate?” They both had the same

answer: “I want to investigate how the diaspora contribute to development in Rwanda,

specifically their remittances.” I asked, “why the interest in their remittances?” The first one

said:

I am a genocide survivor with no parents, my Aunt fled to the USA right after the genocide against the Tutsi. Since then, she has been supporting me and my siblings with our education and other requirements, now you can see I am now about to finish my undergraduate education. My siblings will also be finishing soon. We are not alone in this experience; I know most of my friends depend on such support. My interest is to investigate how these financial inflows are contributing to development of recipients in Rwanda.

This woman further emphasized that “it has been my plan to conduct such study since I

started University.” I received a similar testimony from the second student (though his aunt

leaves in Canada). A few years later, I encountered similar interest when I was teaching at the

Independent University of Kigali (ILK) in 2013. A final year student approached me during

break time and asked if I could advise him on how he could conduct his research project on

the role of remittances in poverty reduction. I asked him why he was interested in this topic.

His answer was:

We migrated from the Democratic Republic of Congo and we settled in Rwanda; some of us had no prospect of study. I was lucky my uncle, who had migrated to Canada, supported my education from primary up to University and you see I am about to finish. It has been my wish to explore this topic and demonstrate the role of these people (the diaspora) in promoting the socio-economic welfare of those of us who remained behind. There is lack of evidence about the socio-economic contribution of the Rwandan Diaspora out there.

This topic has not only been the interest of students. They share this interest with most

Rwandans inside and outside the country. Another example is a Rwandan Diaspora couple I

met in 2010. They had lived in Italy for 20 years; the woman was a business owner and a

man was a medical doctor. They had implemented their long-term idea of investing back in

Rwanda in real estate and hotels. During the implementation of their projects, they

experienced conflict with their relatives who were managing their business in Rwanda. At


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that time, relatives who were running the businesses of their diaspora relatives were able to

take advantage. As this couple struggled with this, they were advised to contact the Ministry

of Foreign Affairs and Cooperation for facilitation. They ended up in our office. The Ministry

and the Rwanda Development Board responded quickly and addressed their problem. This

couple could not believe their problem of almost three years could be solved this quickly.

They were excited and came back to our office and said: “we are so happy with your support

and it has encouraged us to do more back home. There are many Rwandan Diaspora projects,

but they are not documented and most of the diaspora want to invest back.” This couple and

their family have since permanently returned back to Rwanda.

Based on my professional experience working with Rwandan Diaspora (in different

occasions), me told me that they were implementing projects in different parts of Rwanda.

Some helped their families and relatives to set up micro projects; others implemented

community projects, such as the One Dollar Project6, a diaspora project that constructed

hostels for University students who are genocide survivors and had nowhere to stay during

the holidays. Others construct schools or are heavily involved in buying land and houses in

Kigali and other parts of the country. This growing interest in contributing to Rwanda’s

development led to requests of the Ministry to facilitate the transfer of money back home at

lower costs. These requests either came directly to the Diaspora Office in the Ministry or

through events that brought together the diaspora and the Government of Rwanda in the

country or abroad.

In 2009-2010, the Ministry responded to these requests by requesting the Bank of Kigali

(Rwanda’s parastatal bank) and other commercial banks to develop a diaspora bank account

and other diaspora products and to subsidize diaspora money transfers. Rwandan embassies

abroad were also requested to facilitate the process by providing legal and administrative

documents, other services were done online. The diaspora quickly responded to this initiative.

In the following years, formal remittances started progressively increasing and more

commercial banks began opening diaspora accounts and products targeting the diaspora in

their host countries. Moreover, bank officials and other private business individuals began

accompanying the president and other high-level government officials on Rwanda Day.

Rwanda Day is a major annual event where the president meets Rwandan Diaspora

communities abroad to discuss development in Rwanda and how the Rwandan Diaspora can

contribute. This is a mobilization strategy to encourage the diaspora to contribute. Since 6 For details on part of this project on the Rwanda Diaspora Global Network. (n.d.). Involvement. Retrieved from

http://www.rwandaglobaldiaspora.org/categories/.accessed on 6th May, 2019.


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2010, this event has been instrumental in mobilizing the diaspora to contribute to the

development in Rwanda. It has also been a policy forum for addressing challenges the

diaspora face and a platform where locals and the diaspora (and their friends) meet and

business deals are made.

They are number of interesting testimonies and cases about the interventions of the

Rwandan Diaspora in the socio-economic development in Rwanda. Some are individual,

household-based, and others are collective. Due to these developments, in 2015, the stake of

remittances and development reached at the policy agenda of the Ministry of Finance and

Economic Planning of Rwanda. There was a call to mobilize remittances from the diaspora to

promote savings and investments in the country. In that process, a policy strategy for

mobilizing remittances for investments in Rwanda was developed. I was associated with the

development of the strategy. The underlying question was, how do we better understand the

development impact of remittances? Currently, the diaspora are targets for commercial banks,

telecom companies, money transfer companies, real estate developers, and others targeting

their remittances and savings. This led me to think about the following question: what is the

contribution of remittance inflows to the development outcomes and how can we best

measure and explain the development effects of remittance inflows? Under what conditions

do remittances affect development outcomes? A number of things have influenced the

theoretical, empirical and analytical framework of this study:

First, though we knew that remittances influence development in Rwanda, these anecdotes

show that we did not know how remittance inflows work to produce development outcomes.

Something interesting was going on, but it was not really grasped by policy makers and

scholars.

Second, the mediating and conditional role of the policy and institutional framework in

inducing, shaping the choices of, and incentivizing remitters is visible and the same applies to

the choices of recipient households in how they utilize remittances. Most importantly,

improvement in policies and the institutional environment altered attitudes, created

opportunities, and increased interests to repatriate remittance resources in Rwanda.

Third, we see practically where remittances are channeled and utilized by the diaspora and

remittance recipients and the change taking place in people’s lives. It is clear that people

appreciate the effect of remittances in their life.

This information provides us with insights and propels us to think about the theory and

analytical framework employed to study and explain how these inflows affect development

outcomes and through which mechanisms these changes take place in developing countries.


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The development impact of diaspora resources remains a policy puzzle for researchers and

policy makers. We observe that these financial resources are contributing to the welfare

improvement of recipient Rwandans, even with a spill-over effect to non-recipient

households and communities. What would have happened to the students described above if

they had not received remittances from their relatives? What would have happened to the

Diaspora couple who was investing in Rwanda had there been not a friendly and encouraging

policy and institutional framework? These counterfactual questions challenge researchers and

policymakers to consider how we can empirically understand the development implications

of remittance inflows. Ultimately, these financial resources end up in the hands of the

recipients, either at a personal or a household level. They may be invested in property or

other socio-economic investments, which ultimately affects both micro and macro

development outcomes in the economy. Formal remittances are channeled through banks and

other money transfer operators, which affects financial sector development and the

components of the national account. Therefore, the underlying question is, empirically, how

can we better understand the development impact of these inflows in developing countries

like Rwanda? How and through what mechanisms are these inflows contributing to the

development outcomes in Rwanda? How does the institutional environment and policy

framework causally condition this process and the mechanisms through which these inflows

affect development outcomes? How do the development effects of remittances play out

among recipient households in different socio-economic categories? These questions prompt

the researcher to conduct an in-depth analysis in Rwanda.

In recent years, migration has also been observed but for different economic and social

reasons. As a result, more remittance inflows have been sent by the Rwandan Diaspora. The

remittance growth trends indicate a low and constant trend for the period from 1980-2000

(refer to Figure 4. 3), but this trend picks up immediately after the genocide. This leads to one

of the main questions of this thesis: why the low and constant trend before 1994 and why the

steeper, steady growth trend from immediately after the genocide up to recent years? The

political stability and structural reforms in different sectors (social protection sectors,

economic stability, business environment, services, financial sectors, government

effectiveness, etc.) of the economy resulted in the strong and stable economic growth (with

an annual average of 7% of GDP per capita growth) the country has experienced over the last

two decades. Poverty has decreased from 58.9% in 2000/2001 to 39.1% in 2013/14, while

extreme poverty has decreased from 40.0% to 16.3% in the same period (National Institute of


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Statistics of Rwanda, 2013/14)7. Nevertheless, we know little about the stake of remittances

in this observed development in the country in recent years.

In recent years, progress in the areas of institutional and development factors has been

observed. In the SSA region, international organizations and think tanks have echoed

Rwanda’s progress in areas of governance and institutional development. International

organizations indicate that Rwanda leads African countries in some institutional and

economic development indicators associated with improved development outcomes. The

World Bank’s Country Policy and Institutional Assessment (CPIA) report “ranked Rwanda

first among SSA countries with a 4-point scores (rated on a scale of 1, low to 6, high) in the

area of institutional performance” (World Bank, 2015b: 4). The report argues that in relation

to other SSA countries, Rwanda leads in performance of a variety of institutional and

macroeconomic indicators. Indeed, the report shows that in Rwanda, policies are actually

implemented, rather than remaining promises or intentions8. In other words, the country is

not only undergoing economic progress, but also progress in institutional and policy

effectiveness. The recent joint study between the World Bank and the Government of

Rwanda (Country Report, 2018) indicates that Rwanda has registered rapid improvement in

governance, including control of corruption, rule of law, regulatory quality, business climate

and civil service performance, which gives Rwanda a competitive edge over its SSA peers.

The Mo Ibrahim governance index report (Mo Ibrahim Foundation, 2016) places Rwanda

among the five African countries that have demonstrated greater improvement in the overall

governance level and sustainable economic opportunities over the last decade. It emphasizes

that “Rwanda is the only country to feature both among the ten highest scoring and the ten

most improved countries over the past ten years.” The same report places Rwanda first in

Africa in performance in human capital development. Transparency International

(Transparency International, 2015) place Rwanda as the fifth-least corrupt country in Africa,

44th worldwide and first of East African countries. In areas of economic institutional

environment, the World Bank Doing Business Report (2015) ranks Rwanda as the second

country in Africa in ease of doing business. Regarding financial sector development, the

7For more details, see the Rwanda Poverty Profile Report (2013/14), Results of Integrated Household Living Conditions Survey (EICV), National Institute of Statistics of Rwanda. 8 The CPIA consists of 16 criteria grouped in four equally weighted clusters: economic management, structural policies, policies for social inclusion and equity, and public sector management and institutions. For each of the 16 criteria, countries are rated on a scale from 1 (low) to 6 (high). The scores depend on the level of performance in a given year, rather than on changes in performance compared to the previous year. The ratings depend on actual policies and performance, rather than on promises or intentions. In some cases, measures such as the passage of specific legislation can represent an important action that deserves consideration. However, the manner in which such actions should be factored into the ratings is carefully assessed, because in the end it is the implementation of legislation that determines the extent of its impact (World Bank, n.d.).


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country has registered progress in the indicators of financial development. According to the

available statistics from the National Bank of Rwanda, the broad money and credit to private

sector increased significantly from 1995 to 2014; subjected to GDP, the broad money (M3)

and credit to private sector to GDP ratio increased from 14.4% and 7% in 1980-1993 to

20.3% and 13.4% in 2000-2013, respectively. Similar statistics indicate that the financial

sector contributed 6% to GDP in 2014 (National Bank of Rwanda, 2015b). With these

statistics and other macroeconomic indicators, the country has been able to maintain prudent

macroeconomic stability over the last decade.

The improvements in the institutional and development indicators discussed above appear

to have been influenced by the political and policy approach the country embarked on

immediately after the genocide. There have been elements of political settlement which

influenced governance, the economy and inclusive development in the country. It is worth

observing that the political settlement approach is normally underestimated or ignored in the

scholarly narratives explaining factors behind political and economic stability and progress in

post-conflict countries like Rwanda. Political settlement has been one of the underlying

factors for Rwanda’s rebirth and recent development immediately after the genocide. On this

note, it is worth recalling that before and during the genocide, Rwanda was grounded on

divisive politics and unequal distribution of development benefits in the country. With this

background, a paradigm shift is observed immediately after the genocide, during which the

entire system changed. This can be attributed to the political settlement that ushered peace,

stability, and inclusive developments in all aspects of the country. The political settlement

was based on the politics of consensus and people-centered development policies, which

improved performance and built confidence in the regime by the citizens (including the

diaspora).

I argue that, in contrast to the previous regime (that focused on divisive politics and

ethnicity), the post-genocide regime was able to consolidate and successfully manage the

political settlement. As result, it established a solid foundation for national unity, national

building and fast economic recovery and progress. This is reinforced by Kelsall’s (2016:8)

argument, “at the heart of political settlement is the idea that societies cannot develop in the

midst of violence or civil war; yet the way different societies solve the problem of violence,

the political settlement they craft, creates powerful path dependencies for the way they do or

do not subsequently develop.” He emphasizes that political settlement is a crucial factor in

development. Kelsall uses Rwanda as a contemporary example of a classic development state

of the post-war era (comparable to South Korea and Mauritius) that has successfully


100

implemented an inclusive, coordinated and impersonal type of political settlement. In

Rwanda, the political settlement paved a foundation for formal institutional and economic

reforms, national unity, nationhood (that had been lost), power sharing, stability,

reconciliation of Rwandans (that has been destroyed by genocide and previous politics), and

regaining of trust in the regime by Rwandans. The settlement also provided an opportunity

for the most marginalized groups, such as Tutsi, women and youth. These fast and necessary

structural reforms and policy enabled process and government effectiveness. Experience

shows that the policy making process and implementation fails in divisive and combative

political landscape, especially in developing countries. Currently, in Rwanda, the political

settlement still exists, but it is continuously evolving to accommodate new development

(political and economic) issues.

In the context of the diaspora, in contrast to the previous regime, the post-genocide regime

prioritized the Rwandan Diaspora in the national development. A number of policy initiatives

were established and implemented geared towards involving the Rwandan Diaspora in the

national development. The Rwandan Diaspora have constitutional rights of leaving and

returning to their homeland when they want, dual nationality, voting rights, and participation

in the national dialogue (see Articles 23 and 24 of the Rwandan constitution). Through its

foreign policy, the Government of Rwanda (MINAFFET, 2019)9 has embarked on an

aggressive policy of engaging its diaspora in the national development. This policy has the

support of practically every Rwandan, whether they agree with the current regime or not.

Rwanda’s foreign policy broadly provides a policy orientation for facilitating the Rwandan

Diaspora to remit their resources (expertise, investments and remittances) for development

back home. This policy informed a number of programs and initiatives geared towards

attracting Diaspora interests and resources back in Rwanda, such as the One Dollar

Campaign mentioned above.

Rwanda Day is an annual forum that brings together the president, other high government

officials and the diaspora to discuss different issues pertaining the national development.

During this event, a number of diaspora issues are addressed. Information on business and

investment opportunities in Rwanda are provided to the Rwandan Diaspora and their friends.

The forum provides opportunities for Rwandan business communities to interact with the

diaspora and their friends and deals are made. However, it remains a challenge to access

9http://www.minaffet.gov.rw/policies/strategic-framework-policy/ accessed on 29th August, 2018; http://www.rwandaglobaldiaspora.org/diaspora/.


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formal documentation about the business and investment projects that were established

through Rwanda Day fora.

The “Come and See, Go and Tell” program facilitates a short-term visits for members of

the Rwandan diaspora who have not come to Rwanda for a long time. During such visits, the

Rwandan Diaspora are shown the different institutions and areas in Rwanda to be better

informed about the developments in the country. Experience shows that, after such visits,

some decide to return permanently. Others develop project ideas to implement in Rwanda.

The annual Diaspora Youth Camp organized in Rwanda is another initiative that brings

diaspora youth from different countries to Rwanda. The program is organized by the Ministry

of Foreign Affairs and Cooperation together with the Ministry of Education. During this

camp, diaspora youth learn about the history and past, present and future developments in

Rwanda. Rwandan communities abroad have been encouraged and facilitated by the

Rwandan diplomatic missions to build and strengthen their structures abroad. This has

increased communication and collaboration between Rwandan migrants and their country of

origin. This communication has facilitated the accessibility of local opportunities in Rwanda

by the Rwandan Diaspora.

As determined by the constitution, the Rwandan Diaspora are involved in the national

policy decisions, such as national elections and national dialogue. The national dialogue is an

annual event that brings together the president, high government officials, private sector, civil

society and citizens from different parts of the country to discuss issues regarding the

development of the country.

Over the last decade, banks have been encouraged to develop diaspora products to

mobilize formal remittances and investments from the diaspora, coupled with the

abolishment of exclusive agreements signed between banks and money transfer operators in

Rwanda to encourage competition and openness of the remittance market in Rwanda.

All the above highlighted policy initiatives, together with the institutional and

development progress the country has experienced in recent decades, have continued to pay

dividends in terms of attracting the interests and resources of the diaspora back in Rwanda.

The positive economic growth trends, government effectiveness, institutional enhancement

(both political and economic) and diaspora engagement initiatives have increased the

confidence and trust of the Rwandan Diaspora in their country of origin. This goes hand in

hand with the Rwandan Government’s growing recognition of the impact of the Rwandan

Diaspora on the national development and their commitment to support their families back

home. All these initiatives have resulted in the return of some of the diaspora, either


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temporarily or permanently, and increased remittance inflows to the country for different

socio-economic motives. Unfortunately, this institutional and policy environment has been

underestimated in the theoretical and analytical frameworks examining development impact

of remittances. I contribute to this scholarship by examining the stake of remittances in the

development outcomes in Rwanda. To what extent do the repatriated remittances from

Rwandan migrants contribute to the development and how can this effect best be measured in

Rwanda? How has the policy and institutional framework influenced the mechanisms through

which remittances are attracted and deployed productively to affect development outcomes in

Rwanda? The next chapters provide detailed empirical results about the growth effects of

remittances in SSA countries and Rwanda in particular. The conditional effect of institutional

and development factors influencing the growth effect of remittances SSA region is

extensively discussed.

In conclusion, Rwanda offers a sound case to study the micro and macro implications of

remittances on development. The country presents itself as a clear example of the

implications of the institutional and policy framework in conditioning the overall

development outcomes, particularly remittance-development outcomes. It demonstrates how

effective institutions and policies matter in influencing development. Figure 4. 4 and 4. 5

above demonstrate the turning point, the big difference between pre- and post-genocide

Rwanda in the context of the volume of remittance inflows and their implication for

Rwanda’s development. The year 1994 was a turning point in the long-run sluggish effect of

remittances in the country’s development. There must be reasons for this, one of them being

the improved effective institutional and policy environment. There are other exciting

different (positive) socio-economic trends in post-genocide Rwanda. This can be attributed to

the effective policies and institutions that were introduced and implemented immediately

after the genocide and the active engagement of the diaspora in the national development. As

discussed above, the post-genocide regime adopted different institutions, policies, structural

reforms and diaspora policies that resulted in impressive recent development and remittance

inflows to the country.

These stories of development success, backed by rigorous empirical examination, provide

a credible approach to better understand the broader view of remittance-development

outcomes. They contribute to the scholarship of remittance and development. My personal

work experience with the diaspora, the positive development trends in Rwanda, and the

ongoing theoretical and empirical gaps in the field of remittance and development, inspired

me to explore the broader understanding about the development impact of remittances.

Documents

UvA-DARE (Digital Academic Repository) Remittance inflows ... · 4.0 Remittance Inflows to SSA Countries and Case Selection of Rwanda In recent years, the world has witnessed increasingly