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For more than 15 years, Rwanda has placed climate change and the sustainability of its economy at the forefront of its national strategy. Doing so however, requires an overhaul of the entire financial system. In the approach to the inaugural Africa Climate Summit in Nairobi on September 4-6, which aims to address Africa’s increasing exposure to climate change, we discuss Rwanda’s plan to reduce emissions – and the obstacles ahead.

Soraya M. Hakuziyaremye is Deputy Governor of Rwanda’s National Bank.

What is Rwanda's stance on climate finance?

Soraya M. Hakuziyaremye: Rwanda is the first African country to submit an updated Nationally Determined Contribution (NDC) [countries' self-defined national climate pledges under the Paris Agreement], and is aiming for a 38% reduction in emissions by 2050. 

Nonetheless, with the estimated cost of implementing the NDC standing at $11 billion, it is imperative to attract and incentivize green investments. Achieving this necessitates a restructuring of the financial system. Rwanda has already outlined a roadmap for sustainable finance (Rwanda Sustainable Finance Roadmap 2022-2029), which seeks to establish a robust regulatory framework for green finance and climate risk management within the financial sector.

We have made significant progress in this regard, as evidenced by the allocation of funding to Rwanda through the IMF's Resilience and Sustainability Fund, designed to enhance resilience to climate-related shocks and promote sustainable growth. Additionally, we have witnessed substantial donor participation, including from AFD, in Ireme Invest—a facility geared towards scaling up climate financing and mobilizing private investments in the climate sector.

Further reading: Rallying public and private climate finance in Rwanda

What are the current challenges hindering the advancement of green finance in Rwanda?

Despite the strides we have taken, challenges persist, mirroring those faced elsewhere on the continent. A diagnostic study funded by AFD identified four main hurdles:

  • The absence of a standardized definition for green projects, making it difficult to determine their eligibility for green financing
  • The lack of effective, transparent regulations for assessing the climate risk exposure of financial portfolios
  • The scarcity of climate finance instruments, especially in terms of guarantees, insurance, and currency risk hedging
  • A shortage of local expertise in crafting financial solutions for climate change

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How is the National Bank of Rwanda (BNR) contributing to the development of Rwanda's regulatory framework?

The BNR plays a pivotal role in risk oversight and the implementation of the sustainable finance roadmap. With support from AFD and informed by the diagnostic study, BNR is formulating guidelines to enable financial institutions to evaluate their portfolios in terms of climate risks and identify projects that promote greenhouse gas emission reduction. 

Rwanda is taking inspiration from other countries while tailoring the guidelines to its specific context, including the issue of climate change adaptation—a dimension that may not be as prominent in European nations where energy transition is the focal point. The objective is to encourage financial institutions to incorporate climate considerations in their operations.

To help us, we will receive technical assistance and training for both our teams and financial stakeholders, as part of the project funded by AFD. Rwanda is steadfast in its pursuit of becoming a trailblazer in green finance in Africa by transforming its financial system and surmounting existing challenges. Thanks to our ambitious vision and robust partnerships, we are progressing towards a more sustainable future.