Red tape in loan recovery is not only undermining the growth of the micro finance industry but also efforts to bank the unbanked, sector players have said.
According to micro finance top managers who spoke on condition of anonymity because of the sensitivity of the matter, the existing laws are not only bureaucratic but also make loans expensive.
“We are, therefore calling upon legislators to allow room for a more effeicient decentralized system.”
The concern was also raised during the recently concluded ‘CEO’s round table’ meetings that brought together all micro finance institutions across the country.
The meetings were organised by Association of Micro finance Institutions Rwanda (AMIR) and supported by the German Savings Banks Foundation for International Cooperation (SBFIC).
“Streamlining these laws will not only strengthen credit institutions but also promote financial inclusion,” a source said.
“Members are advocating for a strong legal framework that will play a vital role in loan recovery by making the system more efficient,” Jean Damascene Hakuzimana, the chief advocacy and Communications officer at the Association of Microfinance Institutions in Rwanda (AMIR), told The New Times.
Registration of collateral is currently being handled by Rwanda Development Board head quarters in Kigali.
One is required to pay Rwf100, 000 in guarantee fee and another charge of Rwf20, 000 in patent fee.
What’s on the agenda?
Hakuzimana, however said, that AMIR and its partners will continue supporting product innovation, capacity building, performance and motoring schemes to further strengthen the sector.
According to Peter Rwema, the director of programme implementations at AMIR, the round table meeting was an opportunity for the sector players to reflect on what has been achieved and examine the existing challenges.
“We are trying to come up with solutions that were raised during these meetings,” Rwema said.
The sector has in the past helped boost financial inclusion and increased access to credit, especially to small-and-medium enterprises, a sector that government is banking on to drive the second Economic Development and Poverty Reduction strategy.
There are at least 487 microfinance and SACOOs in Rwanda with a capital base of more than Rwf77b.
Government is banking on the sector to reduce poverty levels and create income generating activities amongst rural Rwanda by 2018.