Middle class growing at unprecedented speed – says UNDP

Moving around Rwanda’s towns, you will find many working at laptops and enjoying coffee like at this Bourbon Coffee shop in Kigali (Photo by The New York Times)

Rwanda’s middle class is expanding at unprecedented levels that the country will have one of the largest by 2025 due in part to its booming tourism sector and other social programs, a United Nations study has concluded.

Despite being among the world’s poorest nations, the study released Thursday, says various social and economic infrastructure established in Rwanda mean its people will soon enjoy better human development compared to some developed countries.

The middle class in Rwanda and about 40 other developing countries is rising “at an unprecedented speed and scale” and will require “an epochal global rebalancing,” says United Nations Development Program study titled “The Rise of the South.”

Despite commodity price increases globally, many net commodity-importing countries, such as Rwanda, Uganda and Ethiopia, continued to grow fast. Sub-Saharan African economies were also partly shielded from global shocks by greater regional integration, particularly in East Africa.

One sector that is pushing Rwanda’s human development is job creation. Expansion in jobs does not always have to come from export-oriented manufacturing, says the study released in Mexico. UNDP administrator Helen Clark and Mexico’s president Enrique Peña Nieto unveiled the report.

The other area that is helping expand Rwanda’s middle class is the heavily subsidized healthcare. Access to health services has been expanded in Rwanda by introducing community-based health insurance. Health care providers have been given incentives by linking resources to performance.

“As a result, health care became more affordable in rural areas. And there were visible improvements in health outcomes,” says the study. “…Rwanda is on track to reach the Millennium Development Goal for maternal health.”

“Under-five mortality fell from 196 deaths per 1,000 live births in 2000 to 103 in 2007, and the maternal mortality ratio declined more than 12% a year over 2000–2008.”

Rapid women emancipation has also created increased opportunities for Rwandan women – allowing them to develop without having to depend on men. The report says social policies that empower women, provide more equitable health care and better education are key factors in the expansion of the middle class.

“But technology also has been a huge contributor to the expansion of wealth,” says the report.

Between 2007 and 2012, more than 1.2million Rwandans escaped poverty – pushing the level down to less than 45% of the population. The government has established several social protection programs which are giving direct cash to extreme poor Rwandans.

Earlier this week, the UK announced it was releasing 9million pounds to support the Vision 2020 Umurenge Program (VUP) – which give hard cash to tens of thousands of Rwandans as capital. The World Bank also announced on March 14, 2013, that it was injecting $50m into the same program, which has been around since 2008.

As a result of the quick drop in poverty levels in past five years, Rwanda government reviewed the targeted personal income by 2020 to more than $1,200. At the moment, incomes stand at about $600.

Globally, the UNDP study says by 2025, 1 billion households will be earning more than $20,000 a year, and three-fifths of those will be in countries that today are better known for their poverty than their wealth, among them Rwanda, Brazil, Chile, Tunisia, Turkey, Ghana, Mauritius and some 30 similar nations.

“History has never seen something like this,” said Khalid Malik, lead author of the report.