Savings and credit co-operatives at the sector level, commonly known as Umurenge Saccos, have, since 2009 led the drive towards financial inclusion for all by offering financial services, particularly loans and opportunities for savings to Rwandans with limited access to formal banking services.

To date, Rwanda’s microfinance sector boasts of 416 Umurenge Saccos, serving more than 1.8 million clients.

One would expect that the institutions’ members cum clients, being more or less like shareholders, should access credit at lower interest rates compared to what commercial banks charge, which currently average 17.6 per cent. However, this is not the case. Some of microfinance institutions (MFIs) charge an annual interest rate of up to 24 per cent. This has obviously dampened the speed in the race towards formal financial inclusion, and access to affordable loans.

Peter Rwema, the programmes director at the Association of Microfinance Institutions in Rwanda (AMIR), however says clients usually want convenient services that address their needs; high or low interest rates notwithstanding.

"There is no point in saying that you offer 12 per cent interest when you are not solving my needs. So, what they need is whether their needs are met and not how much interest you are charging,” he argues.

Rwema says if the rates were as high as some people would want Rwandans to believe, borrowers would have shied away from using Saccos, and MFIs in general.

The sector accumulated total deposits of Rwf84.5 billion in the first nine months of last year, up by 21.6 per cent compared to the Rwf69.64 billion collected in the same period in 2013.

During the period, the sector’s gross loans increased by 18.4 per cent, from Rwf72.53 billion to Rwf87.03 billion, signifying increased lending towards the members who have small businesses in their habitual communities.

Rwema said rather than complain of high interest rates, clients usually want efficiency and less bureaucracy in securing credit. Of course, being members, it takes less time to get credit from Saccos than in banks.

On the other hand, administrators of Saccos say with the loans being issued to clients of small amounts, they are expensive to administer as a result of high transport costs incurred while travelling in the rural areas and administrator salaries.

Claver Mukeshimana, the head of Runda Sacco in Kamonyi District, explains how Saccos compute interest charges: "When calculating interest rates, we look at how much we have to lend, our expenses, expected profit and loss, and the earnings the borrower is going to get after investing the money in their business.”

She told Business Times that provisions for bad loans were also an important aspect, noting that many members present no collateral when asking for credit.

Emmanuel Kalisa, a client of Gatenga Sacco in Kicukiro District, says interest rates are high, "which discourages us from applying for credit”.

He says much as Saccos have favourable products, like loans payable in a month, the interest charged does not favour poor clients or small businesses.

"One pays Rwf48,000 interest on a Rwf200,000 loan per month; this is too high,” Kalisa said. He, however, said there are ongoing discussions to lower the rates. "I am hopeful the interest rates will soon be slashed.”

MFIs non-performing loans were up 7.7 per cent in September last year, from 6.8 per cent in December 2013. The regulatory benchmark is 5 per cent. At the end of the day, Rwema says, a four or less per cent difference in interest rates between banks and the MFIs "isn’t that significant” and has not affected clients’ appetite for credit.