By George Kalisa
Rwanda’s Microfinance sector just like other sectors of the economy grossly suffered during the 1994 genocide against the Tutsi when the economy was plunged beyond recovery.
In 2006, the economic vices that included bad governance and misappropriation of funds sabotaged recovery prompting the Rwandan government to move fast to arrest the situation by opting for regulation of the Microfinance sector through the National Bank of Rwanda (BNR).
Some non-governmental organizations (NGOs) had shifted from their original humanitarian mission to usurp the sector that was still nursing the wounds traced to the 1994 genocide could not escape the blame of stunting the sector and subsequent legal action for fraud and mismanagement of public funds.
“After 1994 the country was in emergency period – there were a lot of NGOs helping people and after sometime some of them converted to financial service providers with no professionalism so it (sector) ended up in such a crisis,” said Aimable Nkuranga, the Executive Director of Association of Microfinance Institutions in Rwanda (AMIR).
AMIR is the only umbrella body for microfinance institutions in Rwanda.
The 2006 crisis was a blessing in disguise for the Rwandan government found a panacea to similar challenges in the East African region that took ample time of sessions at the concluded East Africa Microfinance Summit that took place November21-22 in Kigali.
Nkuranga told The Light Magazine during an exclusive interview at the end of the Summit that regulation of Microfinance sector was a response to internal problems other than the trends in the region.
“I think the decision to regulate Microfinance was not based regional trends or anything else. It came from our experience back 2006 when we had a very a bad experience in the sector and the government decided to regulate it through the central bank,” he said.
Nkuranga said the central bank’s action to regulate the sector aligned with the country’s laws.
“…the country adopted the law on Microfinance and the central bank issued regulations guiding the implementations of the laws and the regulations,” he said.
BNR instituted licensing criteria, credentials and indicators that Microfinance players have to comply with.
The current regulation attracts “serious players in this market” and the sector is no longer a place for adventurous who operate briefcase financial institutions.
Nkuranga said that the Rwandan government recognizes the contribution of the Microfinance sector in the improvement of the livelihoods of Rwandans, especially smallholder farmers through the development of agriculture which claims the largest share of loans offered by MFIs and SACCOs.
“Most smallholder farmers are financially served by MFIs and SACCOs. In the portfolios of those institutions, agri-lending takes more than 40% while other sectors take smaller portions,” said the Executive Director.
He added: We are proud of the contribution of the microfinance institutions in the development of the agriculture sector, starting from the inputs and production all the way along the value chain.
He lauded the different partners that have supported AMIR to fulfill its mandate of professionalizing the player in the sector as well as scaling up financial literacy, advocacy and sharing of information.
“Our mandate is to ensure that the sector is operating professionally (…), he said. Nkuranga said that the rapid growth of the sector is attributed to several interventions including capacity building and leveraging best practices in the world.
“Most of the people working with Microfinance institutions have been trained in order to raise their capacity has been built and that is why they’re making a significant impact – delivering on what they are supposed to”.
In partnership with its development partners and sister organization such as the National Cooperative Confederation of Rwanda (NCCR), AMIR established Rwanda Institute of Cooperatives, Entrepreneurship and Microfinance (RICEM) at Kabusunzu in Kigali. The institute is instrumental in scaling up capacity building and “takes care of aspects related to cooperatives among others.
Projection of the sector
Rwanda projects a robust Microfinance sector in ten years where all Rwandans will be financially included besides offering diversified products that match the needs and preferences of different segments of the population following the digitalisation of the sector.
“We want to maximize the use of the technology, offering financial services digitally, but also keeping the human touch with our clients. We hope that financial literacy levels will be increased so that people interact with financial institutions in a more responsible way,” observed Nkuranga.
Currently, Rwanda’s Microfinance sector serves about 3.7 million people representing some 89 per cent of the Rwandan population.
But, relying on clients’ deposits is a challenge that has lingered on for long and hampered the sector’s development to some degrees.
Nkuranga reveals that the creation of a Financial Fund charged with the mobilization of funds from alternate sources is one of the ways to solve the shortage of funds in the sector.
Other challenges include low levels of financial literacy.
“…some of them (client) are still taking loans to invest in unproductive things like weddings and serving the loans becomes a problem,” he added.
Commenting on the Summit, Nkuranga said Rwanda and AMIR in particular benefited from hosting it.
“We learn from best practices in the region and we discuss on how those best practices can be implemented here in our market. We also share with colleagues on our achievements and discussions around – this makes us able fine-tune our practices,” said Nkuranga.
He added: “Important aspects like focusing on youth and women is also a wake up call as well as investing in the future for digital finance. For the economy at large, when delegates come from other countries and spend some time in Rwanda they constitute a market for different economic actors like hotels, transport companies, shops et cetera”.