People buying and selling goods in the Mayange Market, Bugesera District (Photo/Millennium Promise)
The number of formal enterprises rose significantly as well as a spike in jobs created – signaling an increasingly structured and professionalized economic environment, according to the latest Integrated Business Enterprise Survey (IBES) 2023 report.
The report reveals that the number of formal enterprises grew from 27,495 in 2022 to 31,394 in 2023, underscoring the progress Rwanda is making in formalizing its business sector.
This growth was accompanied by a surge in employment opportunities, with formal businesses employing 446,598 people in 2023 compared to 274,914 in 2022.
This growth reflects ongoing government efforts to create a conducive business environment through improved regulatory frameworks, better access to markets, and targeted incentives to encourage businesses to formalize.
The formal sector also continues to outpace the informal sector in terms of income generation, reporting revenues of 31,394 billion RWF, more than double the informal sector’s 15,109 billion RWF.
Sectoral Contributions and Employment
Key sectors, including manufacturing, education, health, and accommodation, made significant contributions to employment and economic output.
Manufacturing: The sector employed 58,004 individuals in the formal sector and 28,421 individuals in the informal sector, showcasing its critical role as an economic driver.
Education and Health: Together, these sectors employed over 182,000 individuals, emphasizing their importance in creating jobs and fostering human capital development.
The growing adoption of information and communication technology (ICT) within businesses has also enhanced operational efficiency and market access, further driving growth in these sectors.
Challenges Persist
Despite these gains, the report highlights persistent challenges. There is still many informal businesses, a situation that has shown limited improvement over the years. Informal businesses dominate in sectors like wholesale and retail trade, repair services, and accommodation, reflecting the difficulties in transitioning to the formal sector.
Access to finance remains a major hurdle, with 12% of formal businesses and 23% of informal businesses citing insufficient collateral as the main barrier to securing loans. Many enterprises rely on personal resources for financing, limiting their ability to expand and innovate.
Underutilization in Manufacturing
The manufacturing sector, while a key employer, struggles with capacity underutilization. Over 50.9% of manufacturing companies reported not using their full production capacity, citing issues such as low demand and unreliable input supply. This inefficiency hampers the sector’s growth potential and limits its ability to compete regionally.
Gender Disparities in Business Leadership
Gender disparities persist in business leadership and revenue generation. Female-led businesses, while growing, continue to trail behind male-led enterprises in terms of size and income. In large enterprises, female managers generated significantly less revenue compared to their male counterparts.
Efforts toward environmental sustainability have seen progress, with 77.1% of formal businesses and 59.1% of informal businesses engaging professional waste disposal services. However, the adoption of renewable energy sources like solar remains low, with only 5.6% of formal businesses and 4.1% of informal businesses using solar energy, despite growing energy demand.
