CASE STUDY

Mobilizing More Money for Small Businesses inRwanda through Innovative Blended Finance
The World Bank Treasury structured a USD
eq. 257.5 million blended finance package
to maximize development financing for
micro-,
smallandmedium-sizedenterprises (MSMEs) in Rwanda.
The unique solution brought together five different
sources of financing (credits, grants, concessionalloans from IDA, Global Facility for Disaster Reduction
and Recovery, and Asian Infrastructure Investment
Bank) to crowd in the maximum available
concessional financing for MSMEs.
The structuring contributes to lengthening thematurity of Rwanda’s external public debt, andmanaging currency and interest rate risks, in line withthe country’s debt management strategy.

Background
Rwanda posted over seven percent GDP growth in thedecade to 2020, but when the COVID-19 pandemic
spread, it put the country into a deep recession.
One of the hardest-hit sectors in the country wasMSMEs. This sector is the backbone of the economy,
making up 55 percent of GDP and 70 percent of total
employment. MSMEs saw a 30 percent decline inactivity, and most were struggling to find financing.
To respond to the challenges facing Rwanda’s private
sector due to the pandemic, the Government
designed and executed an Economic Recovery Plan(ERP) which strengthened social protection, assisted
firms affected by the pandemic, and adopted fiscal
policies to support growth. The ERP was supportedby the Access to Finance for Resilience and Recovery
Project (P175273).
The project aims to provide financial relief tobusinesses affected by the pandemic and to support
the resilience of businesses and recovery of overall
economic activity in affected sectors. The projectprovides credit lines to (a) facilitate refinancing ofRwanda’s latest Medium Term Debt Strategy focuses on maximizing
concessional external debt and developing the domestic markets, extending
average maturities, and increasing fixed rate debt.
1

Photo Credit: A'Melody Lee / World Bank

existing debt obligations, (b) provide working capital,and (c) support investments for business adaptationand growth through the provision of long-termsources of finance.
This is complemented by risk sharing instruments
including a partial credit guarantee scheme, bridge
lending, and an insurance facility, and targeted
technical assistance to firms and participating
financial institutions to increase access to finance tounderserved segments.

Financial Objectives•

Crowd in the maximum available concessional
financing to strengthen MSMEs recovery from thepandemic in Rwanda.

•Build a platform for other development partners
to provide additional future support to MSMEs
through the project’s blended structure.

•Meet Rwanda’s debt management strategy
requirements 1 by: (i) lengthening the tenor ofdebt, (ii) diversifying the currency risks of external
debt away from US Dollars, (iii) managing interest
rate risk by obtaining fixed rate financing.

CASE STUDY
Financial Solution and Outcomes•Rwanda obtained a financial package of USD
equivalent (eq.) 257.5 million comprised of fivedifferent sources of financing. This is a significant
amount of funding to capitalize the ERP.
The innovative package blends (i) USD eq. 100 million
in market-based IDA Scale-Up Window (SUW)
financing (which is provided at IBRD terms), (ii) an IDA
credit of USD eq 25 million, (iii) an IDA grant of USD
eq. 25 million, (iv) a grant from the Global Facility for
Disaster Reduction and Recovery for USD eq. 7.5
million, and (v) a $100 million loan from the AsianInfrastructure Investment Bank (AIIB).
The solution crowded in the maximum available
concessional financing by raising funds from a new
multilateral development bank that is expanding toAfrica. The $100 million co-financing by the AIIB is theAIIB’s first operation in Sub-Saharan Africa. This
blended financing structure will also enable otherdevelopment partners to provide additional futuresupportanddownstream
implementation
arrangements with financial intermediaries in
Rwanda. It also increased the concessionality of theoverall financing. The whole package is considered
concessional and thus ensured that other sources ofdevelopment financing, such as from theInternational Monetary Fund, would continue to beaccessible 2.

And 22.3 percent of the total blended financepackage was through IDA credit and grants, which
are fixed-rate. The Government plans to fix thereference rate of the USD eq. 100 million IDA SUWloan as soon as it is disbursed to manage theinterest rate risks further.

World Bank Treasury’s Role•

The World Bank Treasury’s work involved
structuring the USD eq. 257.5 million blended
financing package from five different funding
sources, optimizing currency composition, andminimizing the all-in costs of financing.

•The Treasury coordinated and worked closelywith the Asian Infrastructure Investment Bankand Rwanda’s government conducting financial
modeling and alignment of the financial terms of
all components of the blended finance package.

•Treasury also engaged extensively with the debt
management office in Rwanda to ensure theblended financing package met all of thegovernment’s strategic debt management needs.

•Working closely with the task team through aseries of virtual missions and engagements,
Treasury financial engineering enabled thesuccessful delivery of this critical funding toMSMEs in Rwanda.

The blended solution for this project met Rwanda’s
debt management strategy requirements in thefollowing ways:••

It maximized available maturities with the IDA
SUW and AIIB financing, structured for 34 years
final maturity with a 5.5 year grace period, to pushout the tenor of its public external debt.
It diversified the currency risks of external debt
away from US Dollars through designing a
package that included 48.5 percent equivalent
structured in Japanese Yen, 10 percent in SDRs,
and the remainder in US Dollars.

AmountAmount in
millions ofUSD eq.
Final
Maturity
Grace
PeriodARM
Rate

IDA ScaleUp Window

AIIB

IDA credit

IDA Grant

GRiF

JPY 10,9Bn

EUR 83.3M

JPY 2,7Bn

SDR 17.5M

US$ 7.5M

100

100

2525

7.5

34Y

34.5Y

38Y

N/A

N/A

5.5Y

5.5Y

6Y

N/A

N/A

19.9Y
JPY TONA +Variablespread in
JPY

19.9Y
EURIBOR +Variable
spread in
EUR

21.9Y

N/A

N/A

0.75%

N/A

N/A

Contact: Miguel Navarro-Martin, Manager, Financial Products & Client Solutions, The World Bank Treasury
 mnavarromartin@worldbank.org  +1 (202) 458 4722
1225 Connecticut Avenue NW, Washington, D.C., 20433, U.S.A.

2Grant element is defined as the difference between the loan’s nominal value(face value) and the sum of the discounted future debt-service payments to bemade by the borrower (present value). International Development Association,Grant Element Calculations Typically, a loan is considered to be concessional if
its grant element is at least equal to 35 percent, which fits within the IMF’s

public debt limits for IMF-supported programs. At the time of the design of thisProject, Rwanda had a funded IMF program ongoing that required new
borrowing to be concessional under this definition.