Rwanda Looks to Private-Sector Investment to Transform Agriculture

Supporting government efforts to expand opportunities for farmers

In Rwanda, subsistence agriculture is a way of life for some 35 percent of the population. However, a long history of sub-optimal business practices and enabling environment challenges inhibited agricultural actors’ ability to connect with markets and raise the financing necessary to enable sustainable growth. With the right market opportunities, the small, densely populated country’s fertile land could support more efficient and productive farming for both domestic consumption and export.

To take its economy to the next level and expand opportunities for its citizens, the Government of Rwanda (GOR) set a goal of transforming agriculture into a market-oriented, competitive, and high-value sector by 2020. From 2014 to 2019, RTI partnered with the U.S. Agency for International Development (USAID) to help Rwanda achieve this goal through the Private-Sector Driven Agricultural Growth Project (PSDAG)

Growing New Crops, Reaching New Markets, and Expanding Financial Opportunities for Farmers

PSDAG’s approach to project implementation focused on mutually beneficial partnerships with committed GOR entities, cooperatives, and small- and medium-sized enterprises working in agriculture. Rather than involving ourselves directly in agricultural operations, we took on a facilitative role, helping boost local GOR and agribusiness partners’ capacities to make themselves more attractive to investors.

Through an innovative small grants program that required grantees’ co-investment and commitment, PSDAG helped agribusinesses and farmer cooperatives adopt upgraded methods and technologies, improve their marketing abilities, and link to markets so their products can reach more customers. Key crops for PSDAG included potatoes, maize, beans, and high-value horticulture. However, rather than focusing solely on growth in a small portfolio of crops, PSDAG chose partners based on the business case for their products. This led to a diverse portfolio of partnerships, which resulted in new products in the Rwandan, regional, and global markets—including milk and yogurt, hot sauce, instant cassava leaves, and potato chips.

While the PSDAG partnerships achieved outstanding results, the real and lasting change is evident within the larger market system. For example, the success of PSDAG partners has led Financial Institutions (FIs) to reconsider funding small and medium enterprises who might otherwise have been overlooked. One partner FI increased lending in agriculture over the course of the project from 14 percent of their portfolio to 24 percent.

An agriculture- and business-enabling environment is vital to the facilitation of private-sector agriculture investment and sustainable value chain upgrading, so, in addition to the grants and co-investment fund, PSDAG supported GOR’s development of national policies and strategies to promote such investment in the agriculture sector. The core partners in this effort were Rwanda’s Ministry of Agriculture and Animal Resources, the Rwanda Development Board, the National Agricultural Export Development Board, the Private Sector Federation of Rwanda, and the Rwandan Chamber of Agriculture and Livestock With these partners, PSDAG was able to support important policies and strategies such as the Strategic Plan for Agricultural Transformation, and established formalized national- and district-level frameworks for Public-Private Dialogues.

Investments for Long-Term Growth in Agriculture

Over the life of the project, GOR and private-sector co-investment partnerships led to more than $29 million in new capital investment in private sector expansion (and an additional $50 million of committed investment) which has subsequently led to almost $59 million in value-added domestic sales and $20.8 million in agricultural exports. The improved private sector for agriculture has, in turn, spurred positive changes for more than 500,000 Rwandan farmers who have been indirect beneficiaries of the project.