For the past year, Access to Finance Rwanda (AFR) has embarked on a journey of transforming Tea Saving and Credit Cooperatives (SACCOs) into innovative, efficient and profitable financial institutions to help serve the poorest people of rural Rwanda.
AFR has secured funding to build the capacity of five tea growers owned SACCOs for a period of two years. SACCOs are namely: CSTCR, AMIZERO, GATARE, PFUNDA and TRASO.
CSTCR, a Tea SACCO nestled in the rolling hills of Rulindo District to the north of Rwanda was one of the five SACCOs that AFR is working with to support on capacity building and to improve automation of their core banking system. The aim for AFR is to help the SACCOs deliver financial products and services to their clients; low income Rwandans, predominately tea farmers and tea pickers.
AFR provides financial support to SACCOs to help improve efficiencies in the provision of financial services primarily but in this case AFR also discovered there was a need for capacity building in the areas of good governance, loan management, human resources management, financial products development and strategic marketing and AFR has been helping CSTCR across all these key strategic areas from 2018 to date.
AFR also adjusted its intervention on automation of CSTCR’s core banking system to include capacity building for the SACCO members of board, management, and staff. It is important to have a competent board and team for the SACCO to register steady growth and improved efficiencies in service delivery to its clients.
In order to insure sustainability and scalability, AFR assigned the international consultant, AUB Finance, to train and work with local consultants on institutional assessment, due diligence, governance, product development and strategy. The international consultant therefore engage four local consultants. The objective of this approach was to avail the required expertise on local market and reduce reliance on international consultants whenever such financial service providers need support.
Capacity building yields results
Ms. Agnes Mukandayisenga, the SACCO Manager says capacity building on a range of managerial and good governance has streamlined the SACCO by creating a framework designed to increase productivity and profitability.
"Through the support and guidance given through AFR we have created a strategic approach and framework to take us forward. We are clear on what we want to achieve now and have set a defined direction for the SACCO’s growth, something we wouldn’t have necessarily done without support ”says Ms. Agnes Mukandayisenga, the SACCO Manager.
The importance of revamping financial products
AFR has worked closely to make improvements to revamp and rebrand financial products that are not appealing to the current client base. In a bid to appeal more to the core existing client pool and attract more clients AFR and the team at CSTCR revamped and redefined six products to meet the financial needs of the target audience groups.
• Nkungukire Account (fixed account): This product allows a client to deposit an amount of money starting at 50,000 Rwandan francs into a fixed account with an annual interest rate at 6%. In order to encourage the SACCO members to save for their future and increase long-term savings 10% is charged on withdrawals before the stipulated period of time agreed.
• Mbikira Account (term deposit): This product allows a client to deposit any amount of savings until such person reaches the required amount of at least 50,000 Rwandan francs to earn an annual interest at 6%.
• Inguzanyo Yihuse (quick loan): This is an existing product that AFR worked with the team to alter the processing period. Now a customer can process this loan in two days rather than a week.
• Hinga Ahanguse (agriculture loan): The brand name calls to action because of its meaning in Kinyarwanda as loosely translated as "Expand you farming”. In terms of marketing, it is now easier for the SACCO to promote such a product as it calls the target market to action.
• Cyuruza Loan (business loan): This loan product targets entrepreneur and traders in the community where the SACCO is operating.
• Wige Nawe Loan (education loan): After realizing that some of the tea pickers left the education system at an early age, AFR worked with COOPEC TRASO to develop an education loan to entice young people from tea fields to go back to school. This product also targets parents working in the tea fields to actively encourage saving for their children’s education.
Evidence is already suggesting that by streamlining product development and training employees across the organization, the SACCO is more relevant and meeting the demands of the community better.
Automation of SACCO operations led improved efficiencies
For a long time, CSTCR, like many SACCOs in Rwanda, have been grappling with a manual operations systems that is failing and affecting the performance of financial services and products on offer.
A year ago, AFR extended a grant to CSTCR to install and put into working practice an electronic banking system that also provides mobile wallets.
"Working with manual operations systems was often a nightmare for both staff and customers. The manual system was tedious and time consuming for the staff and more so for the customers because the service delivery was poor and slow,” says, Agnes, the SACCO manager.
The team at the SACCO used to manually input into Microsoft excel sheets to generate reports in a 30 day time window. With the newly deployed automation using an international core banking system, multiple banking operation reports are generated in 1 day.
"The automation of the operations has made a huge difference to the way we work especially for improving customer service delivery. Today, our customers are getting a faster and vastly improved service. For instance, the loan application process used to take a whole week but it now it takes just one day as long as all required documents have been submitted.” added the SACCO manager.
It also has been noted that the SACCO staff are now more productive because they have more time allocated to strategic thinking, marketing and product development, all helping to improve the SACCOs profitability.
The rise of growth and profitability
By working with CSTCR on capacity building and automation of the SACCO operations profitability has steadily increased. As of June 2019, annual profitability of the SACCO has surged from 20 million Rwandan francs (US $ 22,000) to 47 million Rwandan francs (US $ 51,540), which is a gross profit grown of 135%.
The SACCO was also able to generate new business with the Commercial Bank of Africa (CBA) through integration on MOBICASH, a new mobile payment system. This new business relationship allows the SACCO to collect and submit annual subscription from the universal health insurance scheme (Mutualle de Sante) for its clients. In return, the SACCO earns a commission from the Commercial Bank of Africa.
The amount of credit extended to low-income people has increased from 188 million Rwandan francs (US $ 206,140) to 366 million Rwandan francs (US $401,315). This represents a 95% in annual credit disbursement as of June 2019. The Non-Performing Loan (NPL) has increased from 1% to only 2.5% due to the increased number of clients taking loans.
There has also been 36% growth of the SACCO’s deposit rising from 208 million Rwandan francs (US $ 228,070) to 284 million Rwandan francs (US $ 311,400). This could be because of the increased number of SACCO clients from 8,825 to 10,580.
For sustainability and scalability of interventions in the financial sector, AFR will continue to monitor and share results and lessons as a result of its interventions. AFR aims to stimulate growth for effective, efficient and all-inclusive financial services and products to be widely accessible and in demand from all those within Rwanda especially the poorest.
The writer is Communications and Market Development Manager, AFR