Tue. May 18th, 2021

Law on regulation of Rwanda’s Microfinance stamped out fraudulent financial players that had crippled sector, says BNR

The Microfinance sector had become a haven for the thieving financial players back in 2006 which prompted government’s intervention by bringing into force the law on regulation that had been passed the previous year. BNR officials say victims were reimbursed as they assumed the mandate of regulation and supervision, and compromising this role is not about to happen due to the benefits linked to it – stability and development included. 

Vumi Kacheche, the Head of Programme – Vocational and Commercial education, Maria Knappstein SBFIC Country Director Rwanda (2nd Left), Jules Ndahayo, Chairman of AMIR and Monique Nsanzabaganwa Vice Governor BNR (Centre), Joel Mwakitalu Coordinator at EAMFINET and Aimable Nkuranga, Executive Director AMIR and delegates at East Africa Microfinance Summit2019 in Kigali (PHOTO/George Kalisa)


The East Africa Microfinance Summit that went to Rwanda for the second time is basically a platform for sharing experiences and best practices in the Microfinance Sector. Certainly the two days delegates spent in Rwanda’s spotless city, Kigali created a lasting impact on the Microfinance sector in the region following a consensus that regulation should receive due attention during the anticipated harmonization.

Increased financial inclusion, fast growth and bulging public trust are some of the gains from regulation, according to Rwanda’s experience. 

However, Monique Nsanzabaganwa, the Vice Governor of the National Bank of Rwanda (BNR) told the Summit that regulation per se would not have created a flourishing Microfinance sector that Rwanda boasts of. The sector constitutes of the Savings and Credit Cooperatives.

Much as Nsanzabaganwa contended that regulation helped to put an end to the corruption that posed a huge threat to the future of the sector she said her government exhibited other commitments such as law reforms to fast-track inclusion by especially closing the gender gap.

Nsanzabaganwa disclosed that regulation of the Microfinance was originally Rwanda’s choice and later on graduated into a response to massive corruption which had plagued the sector in 2006.

Nsanzabaganwa, described Rwanda’s humpy journey of the Microfinance sector during her keynote address while officiating the opening of the two-day East Africa Microfinance Summit 2019 in the Rwandan capital Kigali.

“In Rwanda, we started to focus on Microfinance at the policy level in 2005. That when we first had our Microfinance policy,” Nzanzabaganwa said.

“We had a very disappointing experience with Microfinance especially some people who just wanted to abuse the system and did the wrong things and people’s money was lost in these institutions in 2006,” she added.  

It was against this backdrop that regulation of Microfinance became the mandate of the Rwanda’s Central Bank to date and compromising it is not about to happen due to the stability and development linked to it.

“Consequently, it was decided that this sector be put under the regulation and supervision of the Central Bank and government met its due to reimburse customers who had been swindled out of their savings by the fake financial players,” she said.

The Vice Governor disclosed that after putting in place the legal instruments that guide the operations of SACCOs and Umurenge SACCOs programme the country has since then seen tremendous impact on the ground.

The measure on financial inclusion done in 2008 indicated that 21per cent of Rwandans were formally included while 52 per cent were totally and formally excluded. Four year later, financial inclusion double due to established of the SACCOs, and the arrival of the digital services particularly mobile services increased financial inclusion, says Nsanzabaganwa.

“In 2016, when the latest measure on financial inclusion was conducted total exclusion had slipped down to 11 per cent with a gap of four per cent on total inclusion,” said Nsanzabaganwa.

“But, we still have a gender gap on formal financial inclusion currently rated at 63 per cent of women compared to 74 per cent of men,” she added.

How law reforms closed the gender gap on financial inclusion    

The senior economist, however, told the Summit that regulation per se would not explain the current progress in financial inclusion. She, thus, attributed the impressive trend of financial inclusion to both regulation and law reforms on gender that guarantee equality of men and women in as far as access to finance services is concerned. The government, she said, has repealed all the laws that discriminated women.  

“Another thing that has really contributed to the impressive development is not just – but holistically what’s happening in the gender-agenda space in Rwanda,” observed Nsanzabaganwa.

She noted that Rwanda put in place laws that “make it possible for women to open accounts” which was illegal unless they got permission from their spouses.

Today, the law allows the girl child to inherit property such as land, which was exclusively the preserve of their brothers, said Nsanzabaganwa.  

She, therefore, called on African governments to focus on the development of financial sector and ensure that women and youths access financial services in order to gain sustainable development.

Nsanzabaganwa said that directing more efforts in the financial sector would improve lives of women and youths in Africa particularly the Eastern and Southern region where hunger and malnutrition are increasing due to serious challenges in Agriculture.

“Hunger and malnutrition are actually increasing in this region according to the new global report because of harsh weather conditions and climatic disasters,” said Nsanzabaganwa.

She called on participants to focus on how women and youths can access financial services in a bid to address financial exclusion.

The theme of the Summit is “Accelerating women and youth economic empowerment through financial inclusion”.  

Delegates at the concluded East Africa Microfinance Summit 2019 in Kigali (PHOTO/Eric Nzabirinda)

Meanwhile, Jules Ndahayo, the Chairman of the Association of Microfinance Institutions in Rwanda (AMIR) while addressing over 200 participants mainly from East Africa said microfinance started with the focus of offering a diversity of financial services to especially the poor in an effort to boost financial inclusion and ensure sustainability of financial services.

“At the very beginning of Microfinance, the focus became offering a wide range of financial services to the poor and unbanked in general while also looking at the sustainability of financial service providers,” said Jules Ndahayo

Ndahayo said that sustainability of financial services providers and responsible finance were the bedrock of inclusion, adding that there are currently good indicators of financial inclusion in several countries with Rwanda boasting of 89 per cent according to the 2016 survey.

He called on the key players in the financial sector and policymakers to ensure that the good trends in the sector are not leaving behind the “less financially segments” – women and youth stressing that they represent a bigger percentage of the active population.

Also, the Summit is expected to come up with ways of creating a more enabling environment for the microfinance subsector through addressing challenges in the area of product development, regulation/risk management, digital infrastructure and consumer protection and education among others.

Several participants told this reporter that they were hopeful that the ongoing Summit will improve their capacity to manage microfinance institutions.

“Through information sharing we hope we shall gain more knowledge on financial literacy and management (…) said Marie Grace Mukandayisaba, the Vice President, SACCO ABIHUTA KINIGI in northern Rwanda.

Key partners at the summit include BNR, SBFIC, The SEEP Network, CARE Rwanda, Nguriza Nshore and representatives of some 457 microfinance companies operating in Rwanda.

Since AMIR was created in 2007 with 32 founding members its clientele has been growing and currently boasts of 3.7 million representing 54 per cent of the active population.        

AMIR seeks to build a flourishing microfinance sector through advocacy, information sharing, research and development, performance monitoring, capacity building and responsible inclusive finance.

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