Determinants of Household Saving in Rwanda

Despite the rapid growth of its economy in the last decade, Rwanda remains a low-income country. In recent years the country elaborated its “National Strategy for Transformation (NST1)” intending to become a middle-income country by 2035. One key pillar of this strategy is to accelerate sector-led economic growth through increased domestic savings, as a sufficiently high rate of domestic saving is a key determinant of a nation’s economic growth. Succeeding to enhance national economic growth through domestic savings requires more than public savings and capital formation. It also needs to considerably increase private savings, particularly household savings to release substantial resources that would steer up economic growth through financing domestic investments. It is in this line that in Rwanda, the macroeconomic framework for the NST1 identifies private saving as an important driver that will boost both domestic investments and GDP growth to reach the desired 9.1percent average growth over the NST1 period. In this regard, the focus is on enhancing private savings, with the target to increase domestic savings from 12.1percent in 2017 to 23.9percent in 2024, for the country to remain on its path of economic transformation. If achieved, these targets will help reduce Rwanda’s reliance on Overseas Development Assistance (ODA), which has funded 42percent of public investment in 2018/19. The objective of this study is to identify the factors driving households’ saving in Rwanda, with the help of both comprehensive secondary data from three successive nationwide representative household surveys and primary data from a small sample, specially designed to collect information on household saving behaviour.