Authorities in the Eastern Province have urged former clients of collapsed microfinance institutions to repay loans they owe the firms. 

The announcement was made during a meeting that brought together different local leaders in the province, central bank (BNR) officials and managers of several financial institutions that operate in the province.

The government in June 2006 shut-down at least eight microfinance institutions; some of them had declared bankruptcy, after cases of mismanagement of the institutions.

After the closure of the MFIs, thousands of clients remained with unpaid loans, while others who had made deposits made losses. 

At least 15 former MFIs managers were arrested for defrauding and gross mismanagement of microfinance institutions.

According to Odette Uwamariya, the Governor of Eastern Province, despite the closure of the MFIs, people still need to pay up the loans they acquired from the institutions.

She urged all stakeholders to work out modalities to recover the bad debts, adding that local leaders with such loans should pay forthwith.

"I am surprised some local leaders took the loans and refused to pay. I cannot accept this; every local leader with the loan must start paying immediately. Failure to do so, will lead to sanctions,” she said.

Working together 

Uwamariya instructed districts executive secretaries to publicise the bad debtors.

"BNR representatives in districts and local leaders must work together to recover the money. In some districts, there are efforts to recover the money, but in others little being done.”

The government provided Rwf 3billion to compensate the former MFIs depositors and assigned Banque Populaire du Rwanda to undertake the exercise but still not all got paid.

Reacting to the complaints of the former MFI clients, Kevin Kavugizo, Director of Microfinance supervision in BNR, said that there shouldn’t be any worry because all clients’ deposits would be refunded in the near future.

He, however, admitted that there were inevitable delays of payment of the 50 per cent agreed.

"There are complaints we know…but some of the deposits were used to give loans, which is why, we want the money so as to pay individuals in question. But those who were shareholders in MFI will wait as they are virtually the owners,” he said.

MFI’s were servicing more clients than resources they had, hence unable to balance client growth with the growth in their institutional capacity.