The impact of the Rwanda Export Growth Fund illustrated by an arrow trending up over an image of the flag of Rwanda and shipping containers. Photo by Adobe Stock
Financial constraints to exporting: Preliminary evidence from Rwanda’s Export Growth Fund
Rwanda’s Export Growth Fund (EGF) offers subsidised loans to encourage existing and prospective exporters to expand their operations and break into new global markets. Preliminary evidence about the EGF's effect on firm performance reveals that this policy helped boost production capacity, generate new jobs, and increase corporate revenue and tax payments.
In 2016, Rwanda’s Ministry of Trade and Industry (MINICOM) and the Development Bank of Rwanda (BRD) introduced the Export Growth Fund (EGF).
Strong export performance is often seen as key to unleashing firm productivity and spurring economic growth, and this move was intended to harness the potential of exporting firms, which tend to be larger, more skill-intensive, and benefit from learning-by-doing, often leading to improved product quality.
How effective are export promotion policies?
The EGF offers subsidised loans at 10-12% – significantly below market rates of 17-19% – to encourage existing and prospective exporters to expand their operations and break into new global markets. Between 2016 and 2022, the EGF issued around 120 loans to approximately 80 firms.
In this project, we study the effectiveness of this export promotion policy in alleviating credit constraints, generating firm growth, and stimulating exports. We assess the EGF’s impact on firms by combining BRD loan records with administrative firm-level data from the Rwanda Revenue Authority (RRA) in a matched difference-in-difference design.
The EGF was mostly utilised by larger, already-exporting firms
The EGF was initially set up to target smaller firms. However, we find that, even before receiving the EGF, recipient firms had higher revenues, were more likely to export, and were more likely to operate in agricultural sectors and manufacturing compared to other firms in Rwanda (Figure 1). This suggests that the fund was mostly utilised by the largest firms.
Figure 1: Distribution of EGF recipients by size (business revenue) and sector
Two graphs appearing side by side with the panel on the left showing a histogram of business revenues for EGF recipients (one year before participating in the programme) and other formal firms in Rwanda. The panel on the right shows the distribution of EGF recipients, other formal firms, and other exporting firms, by aggregate sector. Source: Generated by the authors using administrative data from the RRA and BRD.
We account for this in our estimation strategy, which compares EGF beneficiaries with a control group of similar firms, by applying different matching techniques based on revenues, sector profiles, and prior growth. Based on the resulting matched treatment and control group, we use a differences-in-differences method to track changes in revenue, employment, and exporting behaviour for both groups, before and after EGF loans were disbursed, to isolate the influence of the EGF from other factors that might shape firm performance.
The EGF has a significant impact on several firm outcomes
Our estimates suggest that, within two years of receiving an EGF loan, recipients of subsidised loans showed significant performance gains over similar firms in the control group. Figure 2 shows that, relative to non-receiving firms, beneficiaries had on average:
- 50% higher business revenues
- 30% higher permanent employment
- 10 percentage point higher likelihood of exporting
- No statistically significant differences in total exports (for established exporters)
These results indicate that subsidised loans boost production capacity and generate new jobs. Note that while we do not find a statistically significant effect on total export volume, our sample of established exporters is very small, and thus our estimates are not very precise.
Interestingly, these effects appear to be particularly strong for smaller enterprises within the EGF sample (those with below-median baseline revenues). This suggests that, while all recipient firms benefit, smaller enterprises may see especially large gains.
Figure 2: Estimated impact of the EGF on firm performance
The figures above show the estimated impact of obtaining the EGF in percentages (for business revenue, employment, and total exports) or percentage points (for the probability of exporting). Time "t" refers to the time when an EGF loan was first obtained. Similarly, the coefficient at time "t+2" refers to the EGF's effect two years after receiving the loan. The periods from t-3 to t-1 are "placebo" periods; these are 1-3 years before the loan was disbursed, so there should be zero "treatment effect" in these years (if there were an effect in these years, the match to the comparison group would not be good enough). For details on the estimation, see Section A1 of the Technical Appendix. Source: Generated by the authors using administrative data from the RRA and BRD.
Notes: The figures above show the estimated impact of obtaining the EGF in percentages (for business revenue, employment, and total exports) or percentage points (for the probability of exporting). Time "t" refers to the time when an EGF loan was first obtained. Similarly, the coefficient at time "t+2" refers to the EGF's effect two years after receiving the loan. The periods from t-3 to t-1 are "placebo" periods; these are 1-3 years before the loan was disbursed, so there should be zero "treatment effect" in these years (if there were an effect in these years, the match to the comparison group would not be good enough). For details on the estimation, see Section A1 of the Technical Appendix. Source: Generated by the authors using administrative data from the RRA and BRD.
Subsidised lending can pay dividends in the short run
A key question for any government-led funding programme is whether it justifies the costs. Our estimates further suggest that, by boosting firm growth and hiring, the EGF helps increase corporate income tax (CIT) payments and Pay-As-You-Earn (PAYE) revenues. Two years after receiving an EGF loan, recipients showed:
- 80-100% increase in CIT payable
- 30-40% increase in PAYE payable
Overall, the resulting increase in tax revenues effectively covers the programme’s costs in under five years, making the EGF a fiscally sustainable policy tool. This finding underscores that subsidised lending can pay dividends in a relatively short timeframe when targeted at firms poised for export expansion.
Towards more systematic and robust policy evaluation
This study provides preliminary findings on the effectiveness of an export promotion policy in a low-income country. Our impact evaluation suggests substantial benefits from subsidised credit through the EGF and points to the fiscal sustainability of the policy.
While we view these results as encouraging about the potential of the EGF, our estimation depends on informative but potentially imperfect comparison groups, which may not be fully comparable with EGF recipients.
To better guide public spending, improve targeting, and optimise industrial policy design, the International Growth Centre (IGC) are working together with the BRD and MINICOM on the design and implementation of a randomised-controlled trial (RCT) of a related programme – Rwanda’s Export Credit Guarantee Facility (ECGF) – in which a door-to-door marketing campaign will randomly offer assistance to a large pool of high-promise firms, thereby supporting take-up while enabling a “gold-standard” impact evaluation.
By comparing outcomes between randomly selected treatment and control groups, we can precisely gauge the ECGF’s effectiveness, refine participant selection, and identify barriers to adoption.