Micro-finance institutions have been challenged to ensure client protection and product innovation to foster sector growth and sustainability.
“As credit funders, we look forward to training and product innovation programmes that will enhance client protection and increase sector competitiveness,” Daniel Muhimuzi, the OIKO Credit country manager Rwanda, said.
OIKO Credit is a private global development financing organisation. “This will help create potential future clients for the micro-finance industry and, hence, reduce poverty among the masses,” Muhimuzi added.
He said it is the responsibility of financial institutions to provide services that restore confidence among customers so that they can save and borrow money without any misgivings.
He noted that lack of demand-led products creates monotony and could affect the micro-finance sector negatively.
He challenged micro-finance institutions to come up with diverse products to enhance their brands.
Muhimuzi, who was speaking during the Association of Microfinance Institutions in Rwanda (AMIR) annual general assembly last week, warned financial institutions against focusing on the rich at the cost of poor clients.
“Focusing on ‘healthier’ clients while neglecting the poor will not reduce poverty, which is the reason micro-finance institutions exist,” he said.
Faustin Zihiga, the president of the Association of Microfinance Institutions in Rwanda, said despite the sector’s outstanding performance, developing new strategies to cement their achievements remained a big challenge.
“We need to continue spearheading our core objectives, especially in financial education and social performance management. We also have to train our staff and board of directors to equip them with knowledge to serve clients efficiently,” Zihiga said.
According to Peter Rwema, the director of research and development at AMIR, micro-finance institutions need to be dynamic to thrive in the competitive financial industry.
“The bottom line is to promote best financial practices while promoting transparency in the sector,” he said.
According to the 2012 annual report on micro-finance institutions, the sector doubled its financial inclusion performance from 21 per cent in 2011 to 42 per cent in 2012. Informal inclusion increased from 39 per cent to 58 per cent with the overall financial inclusion increasing from 48 per cent in 2008 to 72 per cent in 2012.
The report also noted that the total outstanding portfolio, including Umurenge SACCOs, increased by 90 per cent from Rwf36.7b in 2010 to Rwf59.1b in 2011. Total deposits grew by 84 per cent in 2012 compared to 65 per cent in 2011.
The portfolio risk improved from 12 per cent down to 8.5 per cent.
The total number of regulated MFIs and SACCOs reduced from 502 in 2010 to 490 in 2012.
By Peterson Tumwebaze, The New Times
By Jean P. Bucyensenge, The New Times
STAFF MEMBERS of the Association of Microfinance Institutions in Rwanda (Amir) have donated food items and bicycles worth Rwf1 million to Genocide survivors in Nyagasozi Village, Gacurabwenge Sector in Kamonyi District.
The 10 families, grouped under Komezubupfura Association, were also helped to open a group account with a sector-based Savings and Credit Cooperative (Umurenge Sacco).
The benefactors credited the group account with Rwf70,000 as a start-up deposit.
While speaking at the handover ceremony at the weekend, Ritha Ngarambe AMIR Executive Secretary said the donations are “a sign of supporting and walking together with the genocide survivors.”
“We want to extend our family and bring you onboard. We are part of one family and we shall continue walking together towards a better life,” Ngarambe said.
She said by helping the survivors to open up a group account, they wanted to foster the savings culture among them.
“We hope these bikes will help you generate revenues and that part of it should be deposited on this account,” she said encouraging them to embrace the saving culture if they were to prepare for their future life.
JMV Matendeli, the representative of Komezubupfura association, expressed gratitude for the generosity.
“This is a sign that some people out there think about us and it attests of love as a unifying force between humans,” he said.
“We are grateful for the donation and we look forward to making proceeds from it.”
Started in 2007, Amir is the umbrella body for micro-finance institutions in Rwanda that seeks to build capacity in the micro-finance industry in the country. Currently, it has 62 active members.
By Dias Nyesiga, East African Business Week
Kigali — Micro Finance Institutions (MFIs) here have been asked to provide more affordable financial services to people living in rural areas.
The Executive Secretary of Association of Microfinance Institutions in Rwanda-AMIR Rita Ngarambe said that MFIs play a vital role as providers of banking facilitates by being flexible and offering products tailored for rural populations.
“There is market for MFIs in rural areas, what is needed now is to design products that are suitable for the rural poor and also go down to the ground and open their branches,” she told East African Business Week.
Many MFIs have been criticised for not stepping up to help increase the percentage of people using banking facilities.
“With our financial sector structure, MFIs and Saccos should be established closer to the populations, with more flexible products than banks such as providing loans of few amounts and at lowest rates,” Job Opar, a consumer Protection Consultant said.
Accoridng to Finscope Survey 2012 , 72% of Rwandan adults (about 3.2 million) have or use financial products, with 1.3 million Rwandans currently financially excluded while the rate of Rwandans with savings went up to 68% from 54% in 2008.
MFIs have been criticised for having the highest interest rates which range from 16%- 26 %. Long bureaucratic procedures has also been highlighted for loan processing, which affects credit access mainly to the rural folk who cannot read and write.
“If the staff at MFIs have the capacity to either interpret or write loan requirements and agreement in a language their clients understand, I think that would be part of an affordable service provision and would quicken inclusion,” Opar said.
Jessica Massi, an expert in the micro finance sector, said that MFIs have managed to establish themselves closer to people
She however said they still face challenges in capacity building, high operational costs and lack of awareness among people on financial products available at MFIs. “Most staff at MFIs don’t have enough expertise in financial products, risk and loan management which is a big challenge,” she said
Ngarambe however noted that their association, together with development partners has started helping MFIs build the capacity of their staff in risk and loan management and product designing which has in turn minimised the non-performing loans.
According to the Rwanda Central Bank figures the micro finance sector recorded a reduction in their non performing loans ratio from 12% to 8.5%, an indication that the sector is steadily growing.
SEEP and The MasterCard Foundation Announce Networks Selected to Participate in Responsible Finance Through Local Leadership Program
(Washington, D.C. – October 1, 2012) The SEEP Network and The MasterCard Foundation are pleased to announce the eight African microfinance associations selected to be a part of the Responsible Finance through Local Leadership in Sub Saharan Africa Program. These associations, with a collective membership of nearly 500 microfinance institutions, serving nearly 6 million clients, play a key role in supporting the sustainable growth of the microfinance industry. Selected associations include the Association of Microfinance Institutions in Rwanda (Rwanda), Consortium Alafia (Benin), Association Professionnelle des Systèmes Financiers Décentralisé du Côte d’Ivoire (Côte d’Ivoire), Association Professionnelle des Systèmes Financiers Décentralisé du Sénégal (Senegal), Associaҫão Moҫambicana de Operadores de Microfinanҫas (Mozambique), Ghana Microfinance Institutions Network (Ghana), Association of Microfinance Institutions of Uganda (Uganda) and the Association Professionnelle des Systèmes Financiers Décentralisé du Burkina Faso.
The selected associations will have a chance to meet each other at the upcoming Regional Network Summit, taking place on October 1 in Kampala, Uganda. The associations will also undergo the NCAT (Network Capacity Assessment Tool) assessment, a SEEP-developed formal process for conducting organizational assessments of networks and associations devoted to microfinance and microenterprise development in September and October.
“We’re thrilled to begin working with our partners,” says Jenny Morgan, Director of the Association Development Community of Practice at SEEP. “We believe that there is a lot that they can learn from each other, and that we can share with the broader microfinance association community in Africa. Through this program’s investment in developing their capacity to serve their members, clients of microfinance institutions will benefit.”
The four-year, $7.6 million partnership between The SEEP Network and The MasterCard Foundation will improve the core management capacity of these partner networks. It will also advance financial transparency and consumer protection principles among microfinance institutions, and share developments with associations across Sub-Saharan Africa to scale and sustain industry growth.
About the SEEP Network
The SEEP Network is the world’s largest community of microfinance associations. It provides global perspectives on the advancement of microfinance ensuring relevance with respect to local needs, broad participation, and leadership of practitioners. Members are connected in a global learning community spanning 170 countries. SEEP understands the powerful role microfinance associations play in advancing the sector and believe support to local associations is one of the most strategic investments that can be made. It has a proven model developed in its 13 years of working with associations and includes a suite of relevant tools.
About The MasterCard Foundation
The MasterCard Foundation advances microfinance and youth learning to promote financial inclusion and prosperity. Through collaboration with committed partners in 48 countries, The MasterCard Foundation is helping people living in poverty to access opportunities to learn and prosper. An independent, private foundation based in Toronto, Canada, it was established through the generosity of MasterCard Worldwide at the time of the company’s initial public offering in 2006.
Alison Yost, Communications Manager
The SEEP Network
Toni Tiemens, Senior Manager, Communications
The MasterCard Foundation
An extraordinary general assembly of the Association of Micro-Finance Institutions in Rwanda (AMIR), on Friday recommended that its annual membership fee be based on the balance sheet of each member.
Previously, the association set a flat figure, something that did not go down well with most members.
The highest annual fee charged has since been Rwf 400,000.
“We shall be considering the balance sheets of each of our members that will determine how much each micro finance institution would be charged,” Chairman of AMIR, Faustine Zihiga, disclosed.
Among others, member contributions are expected to enable the association to carry out its duties that include advocacy, capacity building for members and conducting of research studies.
“Becoming a member is not enough; we want involvement of members in activities that will promote MFI’s in the country,” Zihiga said.
He revealed that the association has so far a membership of 67 micro finance institutions and called upon those that had not registered to do so.
The extraordinary general assembly was called to seek lasting solutions to ensure active participation and ownership of operations among members.
Speaking to The New Times, the Managing Director of Duterimbere Microfinance, Delphin Ngamije,expressed optimism the new system would work out and encourage participation of members.
“I believe that members of the association have the will and capacity not only to pay the annual fee, but also get involved in the day-to-day operations based on the benefits expected from the association,” said Ngamije.
By Susan Babijja, The New Times
By Dias Nyesiga, The New Times
THE rising default rate by clients of Microfinance Institutions (MFIs) is a result of lack of financial education on the side of clients, according to industry experts.
MFI clients are reportedly challenged with lack of knowledge on the cost of borrowing, determining interests due to their inability to interpret terms and conditions of their loan agreements.
“Terms and conditions are not clearly explained to them, so people really don’t know what they are getting in loans,” said Jessica Massie, a consultant in the MFI industry.
According to Central bank figures non-performing loans for MFIs increased to Rwf4.2 billion in December last year up from Rwf3.6 billion in 2010.
“Financial soundness indicators of the microfinance sector indicated a slight detoriation on measured in terms of capital adequacy and Non- performing loans ratios,” the central bank monetary and financial stability stamen, which was released early this year states.
Massie says that most MFIs do not take the initiative of explaining to the clients what the cost of borrowing would be and conditions applicable.
Most clients of MFIs are low income earners whose literacy levels are low.
“It is difficult for many people to understand interest rates and risks around the loan they are acquiring and because MFIs cannot explain to them, they end up taking loans that they cannot manage to pay back,” Gad Mugabo, an independent financial educator explained
However, Rita Ngarambe, the Executive Secretary of Association of MFIs of Rwanda (Amir) says that the increase is likely due to the reduction of total portfolio ratio after MFIs such as Unguka and Agaseke were recently upgrade into fully fledged banks.
“The reason is because their (Unguka and Agaseke) amount of portfolio were removed,” she explained, saying that the recent campaigns geared towards financial education especially to the rural folks will help increase the saving culture and also speed up financial inclusion for all.
Despite the high NPL ratio, MFIs showed a great performance last year on the basis of assets, deposits and loan portfolio.
Last year MFI consolidated assets grew to Rwf48.2 billion up from Rwf43 billion the previous year while gross loans surged to Rwf37.8 billion from Rwf32.3 billion as and deposits rose from Rwf23 billion to Rwf24 billion.
By Dias Nyesiga, The New Times
Microfinance Institutions (MFIs) must be innovative to avoid duplication of financial products if they are to promote financial inclusion for all.
The Association of Microfinance institutions-AMIR says that the current MFIs’ rush to rural areas to tap the unbanked poor would not reap the expected results unless new products are crafted.
“MFIs must know that products that work here in town cannot work well in rural areas, they need to craft new products that will help these poor people access financial services,” Rita Ngarambe, the Executive Secretary AMIR noted.
Ngarambe says that many MFIs operating in towns open branches in rural areas and still use similar methods in providing services to the people.
“Because of this problem of MFIs using the same products, it is affecting them greatly especially with increasing Non Performing Loans, poor governance and operational risks,” she explained.
She further lamented that the lack of communication skills among MFIs has affected the promotion and development of their products and catalysed low turn up of clients as they cannot understand the services available in MFIs.
Many microfinance institutions and banks design product information in a complex manner unfamiliar to rural poor.
However, Ngarambe noted that AMIR embarked on training MFIs on financial reporting, accountability and customer care as one way of helping them break through challenges hampering their rural performance.
The Rwanda cooperative alliance is optimistic that the tremendous performance of Umurenge SACCOs need stable MFIs that are able to serve the demand already created by the SACCOs.
“We have achieved a lot in cooperatives and what we need now is strong financial institutions that are able to provide banking services,” Audace Bimenyimana, of Rwanda Cooperative Agency said.
He added that more cooperatives are opening and savings have increased due to the initiatives put up to promote rural financial inclusion.
By Dias Nyesiga, The New Times
In a move to scale up efforts to increase financial inclusion for the rural poor and end discrimination, Microfinance institutions (MFIs) have adopted the voluntary savings and loans scheme.
The methodology was first introduced by Care Rwanda to help the rural poor save and acquire loans through their group savings as they build financial credence to access bank and MFIs services.
According to the Executive Secretary of the Association of Microfinance Institutions (AMIR), Rita Ngarambe, the strategy is a result of the current intervention by government and financial institutions to ensure that rural Rwandans access financial services.
“We want to embrace voluntary saving and loans in order to facilitate the process of inclusion and linkages because, this is the right method to reach to the very poor in Rwanda” she said, adding that if the method is adopted, the rural poor would be able to acquire loans from financial institutions.
She also observed that the method would help to mitigate the risks of non performing loans within MFIs.
“In these groups, the portfolio at risk for financial institutions is protected, so you are assured of already organised and trained groups that understand how to invest the loans they have acquired.”
Bright Batamuliza the Marketing and Special project Manager at Vision Finance Company, a microfinance which has already adopted the method noted that the VSL groups reduce on the costs of training and monitoring since they are already organised and financially trained.
“Because we work in rural areas and we are always looking at productive poor, the VSL groups are always better for us. There is no collateral as they cross guarantee each other and this is to our advantage as a microfinance institution,” she said.
From The New Times
The Association of Microfinance Institutions in Rwanda (AMIR), has called on microfinance institutions (MFIs), to conduct their business in a transparent way and work diligently to mitigate business risks.
Transparency is part of the wider corporate governance requirements that should characterize MFIs.
In the past, a number of MFIs failed to carry out risk assessment, and ended up bankrupt, leading to loss of savings among customers.
Rwandans lost money in 2006 when some poorly managed microfinance institutions were closed down, by the Central Bank.
Therefore, in order to avoid a situation where microfinance institutions exploit clients with exorbitant interest rates and misleading products, it is imperative for the financial institutions to be transparent, reliable and to provide quality services.
With AMIR calling for a new system, which involves transparent pricing whereby microfinance institutions will be required to declare their interest rate, the sector will restore confidence among their clients.
Financial institutions are among the key players in the growth of the economy, as they provide credit for small and medium enterprises.
By Paschal Buhura, The New Times
Kigali — A taskforce established to recover money owed to microfinance institutions is seeking more decisive actions, blaming the National Police and the Prosecution for the delays.
Out of Rwf 7.2bn owed, only Rwf 22 million has been recovered in the process.
Statistics indicate that over 100 cases were complete and the suspects were found culpable of swindling over Rwf79 million which they have not been able to refund.
“The two organs should put more efforts to implicate those who misused their offices leading the entities to run bankrupt. They should investigate former employees and managers of microfinance institutions accused of embezzlement as soon as possible,” said Tharcisse Karugarama, the minister of Justice The meeting that aimed at reviewing the implementation of the action plan was the fifth since December last year.
The taskforce is made up of officials from three ministries; Justice, Local government, and Internal Security, as well as the National Bank (BNR) and the directorate of Public Prosecution (NPPA).
Microfinance managements and liquidators were urged to produce a list of defaulters for BNR and the Association of Microfinance Institutions (AMIR) to follow up.
“They should present evidence to the Police and Prosecution for legal pursuit. The technical team should establish the total amount – paid and unpaid – within three weeks for evaluation on March 21,” Karugarama said.