USE CASE #2: A Government-backed Credit Scheme for Miners in Rwanda
In this series, CIRDI is working with our global partner mix to highlight models for tackling a critical problem – how to ensure artisanal miners seeking to make the move to cleaner and more efficient production methods can access the capital they need under fair and inclusive terms?
The series presents these tested solutions in the form of “use-case” studies to better understand the challenges and opportunities that improved access to finance can present for artisanal miners. By providing holistic accounts that trace access to finance models in the ASGM sector from inception to deployment, these “use-case” studies will map actors involved, explain the specific financial instruments designed and institutional platforms deployed, as well as identify key variables that lead to impact, as a potential guide for future action.
The artisanal and small-scale mining (ASM) sector provides an essential livelihood for 100 million miners globally and produces approximately 20% of the world’s gold and 85% of certain gemstones. These populations are globally diverse, and can include a high percentage of women and indigenous communities.
According to the Global Environmental Facility, ASGM (artisanal and small-scale gold mining) represents the largest source of anthropogenic emissions of mercury, which is a pollutant of global concern. Mercury use in ASGM is widespread in emerging economies, and sound chemicals management is a critical policy intervention space for countries seeking to address this problem. Mercury represents a serious threat to maternal health and early childhood development. Due to the complex socio-ecological linkages associated with ASGM, any meaningful dialogue must consider its role in local communities, regional cooperation, global markets, and broader sustainable development initiatives. The Minamata Convention on Mercury is a global treaty to protect human health and the environment from the adverse effects of mercury. With its adoption in 2013, the global community urgently requires solutions to advance, sustain, and support artisanal miners and their families.
Moving towards safe, scalable, and equitable benefits for marginalized and mining-dependent communities working in ASM worldwide requires capital and resources. This would enable ASM miners to invest in technologies that would help eliminate mercury from the supply chain of gold, create economically viable small and medium-sized enterprises, and help generate better livelihood opportunities for communities. Given that ASM is broadly situated in the informal economy, miners are often unable to access formal forms of finance from banks and lending institutions for a variety of reasons such as lack of collateral and low financial literacy. Community and family-based informal lenders tend to dominate this space and leave the door open for predatory lending terms with few opportunities for compliance terms related to optimum environmental and social performance at scale.
CIRDI is especially concerned about how increased capital flows to the ASM sector will affect existing patterns of marginalisation and exclusion for women miners. In certain ASM communities, traditional belief systems create social inequalities that lead to abuse of labour, human rights, and unequal distribution of benefits for men, women, boys, and girls. Equal opportunities for economic empowerment and decent work often fail to materialize for women in the ASM sector, who are then streamed into the precarious and hazardous roles in the value chain.
- government-backed credit schemes
- government-backed tax reinvestment schemes
- community savings funds
- direct grant funds
- revolving funds
- equipment leasing schemes
- downstream buyer support
- private/informal loans
- formal lending/commercial loans
- peer-to-peer lending
- equity investments
- blended finance
- philanthropic gifts or corporate community investment programs
- impact investment/social return vehicles
- social impact bonds
- crowdfunding campaigns
ABOUT THIS USE-CASE
In 2013, 40% of Rwanda’s exports came from mining, 70% of which was artisanal. Mining employed 2% of the workforce, of which 97% were engaged informally, working part-time to supplement incomes from, for example, agriculture. The Rwandan government has recognised the importance of the sector and introduced a policy of formalisation for their artisanal and smallscale mining (ASM) sector to increase in-country beneficiation.
The Government of Rwanda aims to increase mineral production and tax revenues from the sector whilst providing jobs, minimizing environmental degradation, improving resource management and equality, and taking the country to middle-income status by 2035. However, it’s been acknowledged that for the positive change to take place, mechanisation and better practices are needed to increase the efficiency and improve the output of the ASM sector, which requires access to finance. This report presents a model for financing ASM developed based on a stakeholder co-design process built from regional good practices.
The methodology employed a desktop study, workshops, and interviews to first identify demand for mining finance in Rwanda, next the supply of existing financial products, and then the barriers to accessing finance. The research concluded a government-backed credit scheme was the most appropriate model to have the broadest and deepest impact: Rwanda has a relatively well-organised and formalised ASM sector, and a forward-thinking financial sector which has even developed financial services for refugees.