The Governor of the National Bank of Rwanda (BNR), John Rwangombwa, has challenged Umurenge Savings and Credit Cooperatives (SACCOs) to increase lending to their members if they are to have an impact on rural development.
Rwangombwa was speaking on Friday at a meeting with Managers and Board Chairpersons of Umurenge Sacco from the Eastern Province, in Nyagatare District.
“Among the problems we have is the decline in credit from SACCOs despite the rise in savings,” he said, adding that “SACCOs are savings and credit institutions, not only savings.”
Central Bank data shows that 2.7 million Rwandans have accounts in SACCOs
However, only 110,000 members have had access to SACCO loans.
With a combined Rwf62.4 billion, SACCOs account for 44 per cent of the microfinance sector savings.
Rwangombwa said that there’s prevailing misconception that SACCOs are government projects.
“We should all know that SACCOs belong to citizens”
He added that poor management practices, characterised by nepotism and financing of unviable projects, have facilitated the rise in non-performing loans, which threatens the survival of some SACCOs.
Non-performing loans in SACCOs stand at 12.7 per cent.
There are some people who think that SACCOs are government projects and when they are given loans they think that it is a grant from government,” he said.
Fred Mufulukye, the Governor of Eastern Province, said that the meeting gave local leaders and Rwanda Investigation Bureau access to the lists of people who have not repaid heir loans.
The move is part of the efforts fight embezzlement in SACCOs.
Over Rwf556 million was reportedly embezzled by SACCO top leaders in the Eastern Province alone.
Eric Rwagasana, the Manager of Umurenge SACCO in Rweru Sector, Bugesera District, said that; “We work with residents who sometimes do not understand financial services. Yet we must respect the financial sector regulations, especially the ones related to loans.”
He added that SACCOs need to increase sensitisation of the public about their products.
“The majority of the people we work with fear to borrow money. Convincing them to borrow is very hard,” he said.
The introduction of Umurenge SACCOs was informed by the 2008 government survey, which revealed that formal financial inclusion was at just 21 per cent.
According to FinScope survey, Umurenge SACCOs helped increase formal financial inclusion in the country 89 per cent from 42 per cent in 2012.
National Bank of Rwanda statistics show that SACCOs have a combined asset base of Rwf121 billion.
However, their outstanding credit is only 28 per cent of the whole microfinance sector.