By Stephen Rwembeho, The New Times
Microfinance institutions should embrace the use of information technologies (IT) if they want to be helped by the central bank to monitor and manage their financial operations.
“We want to help our people manage their financial affairs. We have a financial inclusion policy and strategy that sets out our approach to promoting financial inclusion,” the Rwanda National Bank governor, Claver Gatete, said.
Rwanda has already started a long-term plan to develop modern IT infrastructure that will accelerate financial inclusion in the country, he added.
The governor was addressing managers of financial institutions and local leaders in Eastern Province over the weekend.
The Eastern Province Governor, Odette Uwamariya, pledged to assist SACCOS embrace information technologies in their operations.
Meanwhile, governor Gatete has said the bank plans to make Rwanda a financial hub in the region, with all the major banks and stock exchanges and other financial services.
He noted that Rwanda was the only country in the region with the highest level quality VISA and MASTER cards, Chip and Pin to authorise transactions, adding that American Visa card would soon be introduced.
“Rwanda can be a regional financial hub…we can improve the country’s economy by drawing in more financial transactions and businesses,” he said.
The governor also noted that they would establish a commodity exchange programme to ensure the development of an efficient modern trading system.
“We need to transform the tradition bound agriculture by creating a new marketplace that serves all market actors, from farmers and traders to processors, exporters and consumers.”
By Robert Ntalaka, New Vision
It was amazing to listen to the sentiments of people who were calling in on one TV talk show while discussing issues of microfinance in Uganda.
Many callers had concerns over microfinance institutions are charging exorbitant interest rates of up to 100% in name of cost recovery, others complained of their property being sold off and how they are being made poorer yet all these institutions have a social mission. Those few voices represent thousands of people who have similar sentiments but do not have a platform to raise them.
Microfinance is about providing financial services to the poor who are not served by the conventional formal financial institutions.
However many unscrupulous microfinance institutions are forgetting their social mission and are taking advantage of the ignorance of the poor. Others are taking advantage of lack a regulatory framework of these tier four institutions to swindle unsuspecting people of their hard earned resources.
Lack of an established policy framework has created gaps in the microfinance policy and microfinance laws to protect members’ savings. Due to lack of clear roles and duties of those responsible for supervising microfinance providers; members lack information on performance of these institutions and this has greatly increased the chances of lose of savings in case the institutions collapsed especially the SACCOS.
It is good that there is an upcoming microfinance conference where they state that the objective is to provide a platform for microfinance stakeholders to discuss pertinent issues and agree on new strategies of deepening and increasing access to financial services.
The conference ought to further seek views of consumers so that this can feed into the discussions during the conference. It is my wish that the conference comes up with clear strategies that will change the face of microfinance in the country.
The government has highly promoted microfinance as a channel for poverty eradication and has been emphasised in many government policy documents such as the PEAP, the medium term competitiveness strategy, the plan for modernisation of agriculture and the National Development Plan (NDP).
But there is still lack of empirical evidence regarding the success of this initiative. The data available is still scanty and it is, therefore, time for microfinance institutions to measure their social impact.
And as strategies for monitoring the social impact of these institutions are drawn, there is a critical need to monitor their financial performance and give feedback. This would increase confidence of consumers and will minimise loses of people’s savings.
Similarly regulation for these microfinance institutions should enacted because it would give codes of conduct to be observed and guaranteeing transparency and redress to consumers. Institutions would have to establish and publish their charges and operational results and this would protect consumers from loss of their funds.
To me, those are pertinent issues that should be given much time during the upcoming conference otherwise even if the government pumped lots of money in these MFIs but when the confidence is not reinstated, there won’t be visible change.
The writer works with AMFIU
Kigali, Rwanda — The recent boost in financial education mainly savings among the rural folks are attracting banks to rush deep in rural areas, a move seen to change the bank’s attitude towards banking rural populations.
Commercial banks are now shifting from targeting urban businesses and individuals to rural based agribusiness, SMEs and personal savings with the recent increase of savings in rural areas.
“Banks move to where they make profits most, I think the increase in savings by SACCOs which have gone deep in villages has convinced banks that they have businesses once they extend to rural areas,” Mr Job Opar, a consultant told East African Business Week.
Most banks are rolling out rural friendly products, opening new branches and extending credit to farmer cooperatives and setting up mobile payment point of sales.
“Most people in rural areas have learnt savings from our trainings but the challenge is now they need banking services to join the formal financial sector, so we need more banks targeting rural areas,” Ms Rita Ngarambe, executive Secretary Association of Microfinance Institutions said.
Moreover, as the Central Bank continues to grant Microfinance Institutions bank statuses, there is a likelihood that competition would compel them to look for untapped grounds.
“I expect a lot of better services, as well as the use of modern technology like Real Time Gross Settlement (RTGS) which facilitates quicker transfer of money and securities from one bank to another.” Monique Nsanzabaganwa, Deputy Governor Central Bank said.
Unguka bank becomes the 10th bank in the country also promising to target rural areas where Equity Bank that opened its doors in Rwanda last year, is strongly growing its footprints.
“We have seen many banks coming to convince us to join them which I had never seen.
They are telling us that banks are for the poor,” Domicilla Nyirandemeye, a member of the Care Rwanda’s Voluntary
savings and Loans groups in East province said Experts are optimistic that the recent strong performance in the financial sector will increase the capacity of financial institutions to bank more populations, to bridge the financial inclusion deficit.
For instance the banking sector saw an increase in the balance sheet of 24.5% while the Capital Adequacy Ratio (CAR) increased to 27.2% in 2011 from 24.4% 2010 which is above the minimum required Capital Adequacy ratio of 15%.
According to Central Bank, Commercial banks’ outstanding investments in REPO amounted to RWF 85.0 billion by end 2011 compared to RWF 60.6 million by end December 2010.
SOURCE: East African Business Week
By Emmanuel Opio, Daily Monitor
Vendors in Lira District have sued the Microfinance Support Centre (MSC) after a contract they signed for a Shs176.4 million loan, was cancelled. The 4,800 vendors now want the High Court in Lira to compel the government-owned centre to pay them Shs41 million for breach of a contract they signed through a Memorandum of Understanding.
According to the MoU signed on August 12, 2011 by the vendors headed by James Okello of Barogole Dongo Saccos and the zonal manager of the Centre, Ms Jessica Nanongo, the soft loan was meant to boost the business of the vendors in line with the presidential initiative to reduce poverty at grass roots.
The MoU also indicates that upon receipt of the loan, the vendors under their different groupings, would get five per cent from the centre as management fee. Mr Peter Olwoch, the chairperson Lira Municipal Saccos, said they expected the loan within two weeks after signing the agreement but were shocked to learn that the transaction was cancelled under unclear circumstances. He said the cancellation affected their business plans.
Efforts to get Ms Nanongo’s comment on the matter were futile yesterday, but an official at MSC who preferred anonymity, said it is upon the Centre to either advance loans or not to certain Saccos.
An August 22 letter signed by the State Minister for Micro Finance, Ms Caroline Okao Amali, directing the cancellation of the agreement, says the move follows an investigation by the office of the Inspector General of Government that many Saccos in the district were abusing the money they receive from the government.
Ms Amali recently said money cannot just be dished out to any Sacco to be mismanaged by some officials for their selfish motives, but only genuine ones would benefit from government funding.
Mr Bob Opio, the deputy resident district commissioner, said the operations of some Saccos in Lira were improper. “We are still investigating some Sacco officials after they failed to return the money they received,” said Mr Opio, adding that some of the officials used the money for their campaigns during the 2011 polls.
From UG Pulse
The Chairman LC V Sembabule district, Eli Muhumuza has asked for investigations in microfinance banks and SACCOs in the area.
The development follows the recent disappearance of about 500 million shillings from Tala ya Mawogola microfinance.
Muhumuza says that the people lost the money due to the laxity of the responsible officers like the district commercial officer.
He has asked the Chief Administrative officer, Charles Kiberu Nsubuga to investigate the increasing number of microfinance banks and the SACCOs to identify their reliability.
Muhumuza has expressed fear that the organizers of these microfinance banks and SACCOs might be having different intentions from other members.
By Berna Namata, The East African
Rwanda has turned to grassroots savings mobilisation schemes to increase access to financial services.
The National Bank of Rwanda (BNR) has licensed 355 of the 416 savings and credit co-operatives (Saccos) operating across the country to offer loans in addition to collecting deposits.
Currently, only 14 per cent of the Rwandan population has access to formal banking products while 7 per cent use other formal products such as loans from microfinance institutions, according to findings from a recent report by the International Monetary Fund on Rwanda’s financial sector.
“We are seeing very positive results, which is a big step in bringing financial services closer to the people… The saccos are going to reach the people, down to the sector level,” Finance Minister John Rwangombwa said of the Sacco programme launched in 2009.
Rwanda has the shallowest banking sector with a ratio of bank assets to GDP of only 19.7 per cent, according to the IMF. It is estimated that 33 per cent of the population is currently being served by saccos and microfinance institutions, leaving approximately 53 per cent of the population unbanked.
Mr Rwangombwa said saccos were not only improving access to finance but also boosting deposits within the banking industry.
As of June 30 this year, deposits and loans from Saccos increased from $35 million to $60 million and $51 million to $54 million respectively, according to the central bank.
“We expect to see saccos improve lending to the population and small investments around the country. Saccos not only give small loans to small investors at their level but they also create big deposits that are given to big investors,” Mr Rwangobwa said.
Claver Gatete, the Governor of BNR, said the central bank had intensified supervision of saccos to improve their governance and minimise risks.
The central bank this year set up a technical control unit with a team of inspectors at each district to monitor and supervise operations of saccos. “We want to make them solid and strengthen their operations as financial institutions to make sure they are viable by offering them technical assistance and monitoring them on a day to day basis.” he said.
The central bank is also working on creating shared infrastructure system to enable Saccos to report like commercial banks on a daily basis.
By Nathan Were, New Vision
THE Budget Committee of Parliament is recommending that the Government owned Microfinance Support Centre (MSC) operations be suspended.
The recommendation follows refusal by the same committee to approve a 4.96b to support operations at the centre.
MSC, as the lead agency in the rural financial services strategy and a key player of the Government Prosperity for All, has over the years successfully developed a formidable rural financial services infrastructure.
It has achieved through support to rural financial institutions, popularly known as Savings and Credit Cooperative Societies (SACCOs), wholesale lending and business advisory services.
With 30% of Ugandans excluded from the financial service systems and 40% serviced by the informal financial service providers (SACCOs, MFIs), winding up operations of MSC would mean that even the little that has been achieved will be eroded. The centre extends wholesale credit to SACCOs for onward lending to active and productive Ugandans engaged in small scale agriculture and petty trade. These small loans are what have enabled many rural Ugandans curve out a living.
A typical SACCO funds its loan portfolio with 80% of borrowed funds. These institutions can only mobilise 20% in form of savings to finance their lending operations. 80% of the SACCOs loan portfolio is borrowed from the Microfinance Support Centre.
If SACCOs cannot access credit for onward lending to their members, and considering that the savings volumes in the SACCOs cannot meet credit needs of the borrowers, 70% of the existing SACCOs will collapse in one year.
The other 30% will survive but not beyond the next year.
One may wonder why the collapse of the SACCOs is a big deal. With only 20% of the population served by the formal financial institutions, majority of Ugandans are not reached by the formal institutions and their only hope to access financial services is the informal financial systems.
A strong rural financial system is key in delivering on the development of the rural local economy. Micro and small entrepreneurs without collateral securities and records required by conventional financial systems have a chance to oil their small businesses through financial services supplied by informal financial service providers.
Through these localised financial systems, they are able to grow their credit history and progressively become bankable and finally enter the formal financial arena.
MSC as a lead agency in this cause has ensured that institutions exist to create rural entrepreneurs.
To date, the centre has cumulatively disbursed sh82.5b to; SACCOs (sh50.9b); Unions (sh7b); MFIs (sh19.6b); SMEs (sh4.3b); and other forms of co-operatives (sh0.355b). The repayment rate stands at 93.17%.
These funds have been disbursed to 1,129 institutions, SACCOs (918); MFIs (73); SMEs (40); Unions (07); other co-operatives (81).
It is this support to the rural financial fabric that has brought down the level of financial exclusion from 62% in the 2007 to under 30% in 2010 according to a FINSOPE report. This contribution cannot be under-estimated.
Although there have been issues of mismanagement, currently under investigation by the Inspector General of Government, the achievements of the centre cannot be overlooked.
What the Government needs to do is to formulate a legal framework that should see MSC operate as a statutory body, appoint a board of professionals and insulate the company operations from politics.
We should clearly analyse the implications of the institution’s closure on the rural financial services infrastructure and the options available to support struggling small businesses benefiting from financial service offered by SACCOs.
The writer is a market and product specialist at the Microfinance Support Centre.
By Hussein Bogere, The Observer
Company disbursed Shs 3bn in three months
The Inspectorate of Government has asked former Vice President, Dr Speciosa N. Wandira, to respond to allegations of mismanaging the Microfinance Support Centre (MSC) through, among others, irregularly appointing a deputy executive director and misusing funds.
Wandira was known as Kazibwe when she was veep. MSC is a Uganda government enterprise incorporated in 2001 to manage its micro-credit programmes. The company is under the ministry of Finance, Planning and Economic Development. In a letter dated March 28, 2011, David Makumbi, on behalf of the Inspector General of Government (IGG), lists 12 allegations against Wandira, chairperson of the MSC board of directors.
Her woes appear to have stemmed from the suspension of Charles Byanyima, the executive director, allegedly to make it easier to divert money towards election campaigns in Busoga sub-region.
In a whistleblower’s memo titled State of Affairs at the Microfinance Support Centre Ltd, it is alleged that Wandira promised to guarantee the money personally and repay it when President Museveni fulfils a pledge of about Shs 20 billion to the Busoga People’s Forum, an organisation she reportedly heads.
When Byanyima resisted the move, Wandira reportedly sent him on a four-month leave. Between December 2010 and March 2011, the Microfinance Support Centre, according to its financial statement, a copy of which The Observer has seen, disbursed Shs 3.1 billion to 501 special interest groups. This period also marked the climax of the presidential and parliamentary election campaigns.
According to a source at the centre, whose offices are located on Windsor Crescent in Kololo, although it was indicated that the money was being dished out as loans to savings and credit cooperative organisations (SACCOs), it was meant to influence voters.
“Many of those cooperatives did not meet the minimum requirements,” said the source.
The replacement of Byanyima as executive director has also been controversial. It is alleged that Iggy Musaali Rwabukuku lacks the requisite academic qualifications and was irregularly recruited. Rwabukuku, a member of the board, reportedly served a probation period of only three months as deputy executive director, before he was confirmed as boss.
His appointment letter, however, written by Wandira, stated a probation period of six months. Following his confirmation, the board, chaired by Wandira, allegedly hurriedly amended the Human Resource manual to cover up the irregularities.
Describing himself as an accomplished banker with 23 years of management experience in finance, Rwabukuku declared his intention to fill the position of deputy executive director in a letter to Wandira, dated May 25, 2010.
“By this letter, I would like to inform you that when this position is offered to me, I shall then tender my resignation as a board member of the company (MSC),” Rwabukuku wrote. His formal application to the board bears the same date.
His CV, a copy of which The Observer has seen, shows that he obtained a Master of Business Administration from Kampala International University in November 2008. The resume, however, does not show whether or not he has a first degree, a matter that was pointed out by the interviewing panel.
Interviews for the position of deputy executive director were conducted on June 7, 2010. According to documents seen by The Observer, each of the three candidates (Wilson Wamatsembe, Asaph Muhanguzi and Rwabukuku) were required to make a presentation explaining the strategies for achieving the MSC’s vision and mission if appointed.
Wamatsembe emerged best candidate with 75.5%, followed by Rwabukuku with 65.75%, while Muhanguzi came third with 60.5%.
“Mr Wamatsembe has the required qualifications, experience and answered technical questions well. He is recommended as the best suitable candidate for the job,” the panel noted in its assessment and recommendations.
Of Rwabukuku who emerged second best candidate, the panel noted that he “may experience adjustment problems considering the fact that he is moving from the board level to operations.”
A member of the panel also noted “a conflict of interest for a sitting board member to appear for a job within the same company.”
Nevertheless, Wandira and her board went ahead and appointed Rwabukuku as deputy executive director on June 24, 2010. No formal explanation was given for the decision to bypass the best candidate.
“I am pleased to inform you that the Board of Directors of MSC has directed that you be offered the position of DED for a period of three years with a probation period of six months. The board is interested in you taking up the offer as soon as possible and, in any case, not later than July 1, 2010,” she wrote.
On July 1, 2010, Rwabukuku wrote an acceptance letter, saying he hoped to “become the face and force of change in the organisation and provide the expertise and innovation for the attainment of the company vision, mission and goals in line with the government’s Prosperity for All programme.”
Besides, the whistleblower reported to the IGG that Wandira draws Shs 500,000 as allowance everyday she steps into MSC, even when she is there to check her personal mail or do private work.
Wandira is also accused of borrowing money from small SACCOS and not paying back. The whistleblower cites Dundu SACCO from which she reportedly borrowed Shs 3m that was never repaid. The whistleblower further alleges that Wandira manages MSC like her personal shop and directs things to be done her way.
The IGG letter asks the former vice president to defend herself against these allegations. When contacted recently, Rwabukuku sounded unbothered.
“You better contact my chairperson (Wandira); I am tired of that thing. I don’t think a newspaper should be concerned with the workings of the company. If you don’t have news, you should look elsewhere,” he told this writer.
Similarly, Wandira was dismissive.
“I am not an employee of MSC. I don’t care, because I know who I am. I don’t care what people say, because I know I’m doing the right thing. You go to the MSC and find out whether I sit there everyday,” she said.
By Dias Nyesiga, The New Times
MTN Rwanda in partnership with banks, Microfinance institutions (MFIs) and government parastatals plans to introduce payment of loans and other bills through mobile money system.
Albert Kinuma, the Head of Mobile Money at the Nyarutarama based telecom operator said, Tuesday, that the system requires users to first register with mobile money and open accounts to facilitate the process of loan repayment and payment of other bills.
“We are now partnering with MFIs and banks to see how their clients can repay their loans and also access accounts. We are also planning by the end of this year to be partnering with all corporate bodies,” he said.
Kinuma also noted that MTN Rwanda, which is ranked second in the use of mobile money transactions in all MTN operations in the region after Uganda, will shift to first position when all corporate bodies, banks and companies would subscribe to mobile money.
“I anticipate that these bodies will encourage more people to subscribe to us so that transactions are better and efficient.”
MTN Rwanda is the country’s leading mobile phone operator with 2 million subscribers. It is the only operator providing mobile money services in the country.
The Director of Information Technology of Energy Water and Sanitation Authority (EWSA), Théogene Rukundo, told Business Times that their clients are using mobile money services to pay for their electricity bills.
“We have already started with electricity and it has been effective and efficient especially with people in rural areas, where they cannot access internet and computers, very soon we shall add water bills payment ,” he said.
Francis Ndayiziga, the Branch Banking Division Leader at Urwego Opportunity Bank (UOB) said this was good news because the system was convenient, modern and would reduce queues in banks.
UOB has a partnership agreement with MTN to facilitate mobile money transactions.
“We have included MTN mobile money transactions in our wallet strategies which include establishment of ATM cards; money wire transfers and this will roll out throughout our branches countrywide; this will bring innovation as we want to be a modern bank in Rwanda,” he said.
He noted that as part of the bank’s strategy to help SACCOS access banking services and stop losing their money to thieves, the bank was adding MTN mobile money to its popular mobile van banking to fully penetrate the hard to reach areas, which most banks have avoided.
By Peter Kiragu, Nairobi Star
The Central Bank plans to widen the net for the credit reference checks to include Microfinance institutions and Savings and Credit Co-operatives (Saccos), the bank’s governor said yesterday.
Njuguna Ndung’ u said microfinance institutions and Saccos will soon start sharing credit history of their borrowers with banks and among themselves.
Currently only banks are required by law to share credit information about their clients as part of measures aimed at reducing the incidence of non-performing loans in the banking industry.”The Central Bank is currently working on modalities of incorporating deposit taking microfinance institutions into the credit information sharing mechanism,” said Ndung’u during the official launch of the church ran SMEP deposit taking microfinance.
Apart from Saccos and MFIs, the governor said the regulator is keen to have all other licensed credit providers access and exchange credit information across the board.
In total, microfinance institutions in Kenya have advanced loans to the tune of Sh16.8 billion.”It is hoped that the merging of credit information from these various players will provide for a stronger credit market that will improve the pool of credit borrowers, decrease defaults, reduce credit costs and ultimately result in a stable financial sector,” Ndung’u said.
Credit reference bureaus are licenced collect information on people’s loan repayment history. They may provide such information to banks or mortgage firms upon request to help them gauge the creditworthiness of potential borrowers. Borrowers with good repayment history are then able to negotiate for cheaper interest rates on loans.
Meanwhile, SMEP DTM has announced plans to convert into a fully fledged commercial bank after it is through with a divestiture exercise that will see the National Council of Churches of Kenya cede 75 per cent shareholding to other churches and other investors. NCCK currently fully owns the microfinance organization.
If the plan to convert into a bank succeeds, SMEP will be similar to Equity Bank which started as a microfinance but later transformed into a bank.
The divestiture programme will start in the next four years according to the NCCK secretary general Peter Karanja. “We invite all churches in Kenya to take opportunity to take ownership in this growing organization,” said Karanja.