Rwanda: Microfinance Sector Soldiers On Despite Burden of Bad Loans
Wednesday, August 27, 2014
The microfinance sector is a key player in efforts aimed at ensuring all citizens access financial services. The sector is made up of hundreds of micro, small and medium firms, including co-operative societies that serve the grassroots.
However, things seem not to be working according to expectations with the microfinance industry suffering under the weight of non-performing loans, according to the central bank’s monetary policy and financial stability statement for the year ended June 30.
The sector’s bad loans were up by 7.6 per cent during the first half of the year, from 6.8 per cent at the end of December, 2013.
Central bank governor John Rwangombwa attributed the increase in loan default rate to poor performance of the sector’s loan portfolio reported by some big microfinance institutions (MFIs).
This comes at a time when government is moving to strengthen the sector’s capacity to make sure it achieves its 80 per cent financial inclusion target by 2017.
The declining performance also follows recent complaints by sector top players about red tape in loan recovery, saying it does not only undermine the growth of the industry, but also affects efforts towards financial inclusion.