Promoting Rwanda’s business environment: Impact of reforms and drivers of change

Motivation Despite its status as a low‐income country in an unfavourable location for economic conduct, and being overshadowed by the devastating genocide of 1994, Rwanda has been recognized for its efforts to improve its business environment via several reforms and regulations according to various indicators. Purpose We contribute an analysis of the extent of improvements which Rwanda’s regulatory reforms have yielded in the business environment. We also identify four interconnected drivers of change which account for the government’s capability to implement successful reforms in the economy. Methods and approach We adopt a quantitative and qualitative approach. Findings We find that Rwanda’s regulatory reforms in the business environment are rather a mixture of true progress and window dressing. The drivers of change accounting for the progress in Rwanda’s economy are the pressure on the government to generate economic growth, the country’s leadership, the pre‐colonial institutional framework, and Rwanda’s aid effectiveness. Policy implications The close interconnectedness of political and economic entities makes it inefficient to implement integral changes to Rwanda’s current system. The Rwandan government should rather credibly commit to its own policies and developmental approaches and continue its progress in private sector transformations without crowding out small‐ and medium‐sized enterprises.