Microfinance experts have called for urgent action to tackle key challenges hindering the growth of Africa’s microfinance sector, stressing the need for stronger collaboration across borders. The call was made on August 18 during the 2025 Microfinance Winter School for Chief Executive Officers (CEOs) of Microfinance Institutions (MFIs) in Rwanda and Zimbabwe. ALSO READ: What Rwanda expects from upcoming microfinance tech summit in Zimbabwe The two-day forum, organised by the Association of Microfinance Institutions in Rwanda (AMIR) and the Zimbabwe Association of Microfinance Institutions (ZAMFI), was held in Kigali under the theme: Forging and Strengthening Sustainable Partnerships in Microfinance Ecosystems through Knowledge Exchange and Collaboration. Jeff Njagi, an expert in enterprise development and microfinance, identified 10 major challenges to scaling up the sector, which he believes require collective action, knowledge exchange, and cross-border collaboration to resolve. 1. Regulatory and supervision frameworks Njagi highlighted that varying rules and regulations across countries make it costly and unattractive for MFIs and Savings and Credit Cooperatives (SACCOs) to expand regionally. ALSO READ: New microfinance liquidity fund set to lower interest rates “To overcome this, we should harmonise minimum regulatory standards and pursue mutual recognition of licenses under the frameworks of AfCFTA, COMESA, and EAC,” he advised. 2. Weak cross-border payment interoperability He also noted the lack of interoperable digital payment systems across borders, which drives up transaction costs. ALSO READ: Rwanda’s financial sector assets hit Rwf10 trillion value “A harmonised approach or even a regional common digital currency could ease these barriers and enhance regional trade and financial inclusion,” Njagi suggested. 3. Limited access to affordable funding Access to stable and affordable capital remains a major constraint. “Reliance on costly deposits, even for SACCOs, due to the convergence of financial services, and decreasing donor funds, limits growth,” he noted. He proposed regional refinancing facilities, blended finance vehicles, and tax incentives to attract both international and local capital. “This is a big opportunity for our countries—there’s a fortune at the bottom of the pyramid.” 4. Digital divide and uneven infrastructure Poor internet connectivity and low smartphone penetration in rural areas significantly hinder digital microfinance expansion. “We must invest in digital infrastructure and support low-tech delivery channels such as USSD and agent banking,” Njagi said. 5. High operating costs High per-unit operating costs and the relatively small size of target clients make microfinance expensive and less scalable. “Serving rural clients is costly given the small loan sizes. Digitizing processes, bundling services, and promoting group lending are critical solutions,” he said. 6. Weak institutional capacity Many MFIs lack robust governance frameworks, risk management systems, and IT capacity. ALSO READ: Rwanda must address skills gap in financial sector “We need to invest in regional training hubs, standardised training accreditation, and incentives to build institutional resilience,” Njagi recommended. 7. Limited credit information Njagi pointed out the lack of comprehensive and interoperable credit information systems. “Sparse credit bureaus and fragmented Know Your Customer (KYC) systems increase default risk,” he said. To address this, he urged the development of interoperable regional credit registries and harmonised KYC standards, alongside a broader culture of repayment. 8. Macroeconomic and political risks Currency volatility, inflation, and political instability undermine investor confidence and increase the cost of borrowing. “Risk-sharing instruments, forex hedging mechanisms, and political risk guarantees are needed to reduce exposure,” he said. 9. Financial literacy and consumer protection Gaps in financial literacy, over-indebtedness, and inadequate consumer protection regulations are also significant barriers. “We must harmonize consumer protection laws and implement nationwide financial education campaigns,” Njagi stressed. 10. Fragmented markets and unregulated competition Unregulated players such as informal lenders ((Shylocks) and some fintechs pose a threat to formal microfinance institutions. “We need fair taxation and regulation for digital lenders and credit-only organizations. Formalization incentives can also level the playing field,” Njagi said. Rwanda’s experience Damien Gatera, Chairperson of AMIR, said Rwanda is proud of its progress in financial inclusion, which increased from 48% in 2008 to 96% in 2024, according to the FinScope Survey. “As we gather here, we are sharing experiences, exploring innovations, and building partnerships to drive inclusive finance and wealth creation,” he said. Godfrey Kabera, Minister of State for National Treasury in the Ministry of Finance and Economic Planning, said.“Financial inclusion has grown from 93% in 2020 to 96% in 2024. Formal financial inclusion stands at 92%, up from 77% in 2020, surpassing our NST1 target of 90%.” The financial exclusion rate has dropped from 7% in 2020 to just 4% in 2024. Kabera credited the success to the modernization of the microfinance sector, especially Umurenge SACCOs, which serve rural communities. Rwanda now has 457 licensed MFIs and SACCOs, operating 408 branches and outlets, serving over four million clients. “All 416 Umurenge SACCOs are now fully automated and operate on a shared core banking system, developed locally. This homegrown solution enhances transparency, service delivery, and integration into the broader financial system,” Kabera added. ALSO READ: What to expect from automation of Umurenge SACCOs He announced that the ongoing consolidation of Umurenge SACCOs into District SACCOs has already resulted in 7 consolidated entities, laying the foundation for the Rwanda Cooperative Bank. “This will strengthen capital, professionalize services, and expand outreach to underserved areas,” he said. Zimbabwe's perspective Saul Chin’anga, the chairperson of Zimbabwe Association of Microfinance Institutions (ZAMFI) said: “In the microfinance sector, partnerships are a necessity. In times of global economic uncertainty, rapid technological change, and increasing demand for inclusive financial services, no single actor can succeed in isolation. True sustainability in microfinance lies in forging strategic, inclusive partnerships built on trust and shared purpose. These alliances must extend across borders, sectors, and communities.” He commended commitment to a responsible and resilient microfinance sector in Rwanda. “Rwanda’s leadership in strengthening institutional capacity, advancing policy dialogue, and embracing digital transformation serves as a model for us all. We look forward to deepening this collaboration and learning from your experience, he noted.
