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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$
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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
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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.