Umurenge savings and credit co-operatives (SACCOs) have over the past years played an instrumental role in easing access to financial services, especially for the unbanked rural masses. The SACCOs encourage a savings culture besides providing members credit facilities to engage in income-generating activities, or to pay school fees for their children which help improve their standards of living. 

The SACCOs are one of the initiatives by government to promote financial inclusion and equitable development across the country. Presently, there are 416 Umurenge savings and credit co-operatives spread in all sectors countrywide. The SACCOs, based at sectors, are key players in the micro-finance industry, which has registered immense achievements, particularly last year when their savings grew to about Rwf65 billion as of September 30.

According to Francisca Mukakarangwa, the Rwanda Co-operative Agency (RCA) SACCOs co-ordination unit director, the Umurenge SACCOs have a cumulative membership of 2.4 million members. "About Rwf136 billion worth of loans has been disbursed to 99,095 beneficiaries; 55,138 males and 21,930 females, while 20,207 groups also benefited. This has significantly helped improve businesses, and contributed to creation of employment for youth and women. Umurenge SACCOs have also eased access to financial services ,ensuring that 90 per cent of Rwandans are within a 5km radius of a financial institution. In fact, about 56 per cent of Rwandans live within a 3km radius from a financial institution, thanks to the co-operatives.

Of the 416 Umurenge SACCOs, 390 own office premises, a development that has created employment opportunities for about 3,029 people, 45 per cent of whom are female. Some 119 SACCOs have outlets, which makes a total of 535 service points across the country.

Look into the future

Mukakarangwa says Rwanda Co-operative Agency is in the process of computerising operations as one of the ways to improve management and service delivery as well as deter fraud.

"We are gathering data on the process, and we will later train stakeholders in ICT and management to equip them with the necessary skills to operate the system. By 2018, we want members to access their funds at any Umurenge SACCO within the network,” she said.

The RCA official said by May 2017, the automation exercise will have started, noting that they will also have set up district SACCOs and a co-operative bank system. She said RCA and stakeholders are already putting in place the necessary infrastructure, including Internet connectivity, electricity supply, and setting up data centres.

"The pilot phase runs from May-June, and will involve 10 SACCOs. After, we will roll out the project, which is expected to end in October,” said Mukakarangwa.

She explained that the establishment of the co-operative bank, 30 districts SACCOs and non-financial co-operatives will be done in two phases, including registration with the Rwanda Development Board, and getting a banking licence from the central bank. They will invite strategic investors to partner with SACCOs.

However, experts argue that while merging of SACCOs, and automation present huge opportunities, they expose them to increased risk of fraud by employees, especially where the members are not ICT literate.

SACCO clients welcome the move

According to Anastase Gatete, the chairman of Rutunga SACCO in Gasabo District, members increased from 4,700 to 5,900 last year, while the group’s capital rose to Rwf130 million, from Rwf98 million in 2014. He says the loan book increased by 30 per cent over the period, and non-performing loans reduced to below 4 per cent, down from 6 per cent.

He notes that the manual accounting system used by most MFIs, especially SACCOs, exposes them to fraud.

Gatete calls for support so the sector is able to install modern financial accounting systems to deter or at least reduce cases of fraud that are always detected late.

Gatete says SACCOs face a challenge of insufficient funds, "which means that many clients do not access credit when they need it”. SACCOs give loans at an interest rate of 2 per cent monthly or 24 per cent annually, while it varies between 2 and 5 per cent per month in other MFIs. However, borrowers always complain that this is still high, particularly in rural areas, and shuts out some people from accessing funding.

Emmanuel Itangishatse, a farmer and retailer in Kamonyi District, is a member of SACCO Irembo Ry’ubukire-Kayenzi. He says funds from the SACCO have helped him expand his businesses. He says any member who saves with the institution for three months and above qualifies for a loan of two or five times their deposit, if they meet other requirements.

Itangishatse says there is need for MFIs to work with insurance companies to reduce risk of losses in the agriculture projects they support. He says farmers incur losses due to unpredictable weather patterns, making it hard for them to repay the loans when the crops are not insured. He said automation will improve financial services in rural areas.

Cesaria Mukanduhura from Shyorongi sector, Rulindo District was able to expand her banana plantation and build a commercial house, thanks to credit from the area Umurenge SACCO. She says she acquired a Rwf2 million loan from the SACCO in 2013 to build a bar, which will be inaugurated soon. She notes that enhancing the capacity of SACCOs means that more Rwandans will access financial services and improve their lives.

General performance of SACCOs

The National Bank of Rwanda report for the July 2014-July 2015 period shows that assets owned by SACCOs grew by 30 per cent. However, bad loans were at 8.2 per cent, an increase from 7 per cent in July 2014, a situation the central bank attributed to weak enforcement of credit policies. Generally, the non-performing loans ratio in the microfinance sector improved marginally from 7.6 per cent to 7.4 per cent over the period. Bad loans are not supposed to exceed 5 per cent to ensure sector stability.

The BNR report indicates that SACCOs registered a 31 per cent growth in deposits to Rwf58 billion, from 44.4 billion, while loans granted increased to Rwf28.9 billion from Rwf24.2 billion the previous year. SACCOs represent 48 per cent and 55 per cent of total assets and deposits, respectively of microfinance institutions (MFIs), according to the report.

Loan distribution in SACCOs shows that 48.3 per cent as the largest share went to commerce, restaurants, hotels followed by public works and construction at 31 per cent, while projects in agriculture secured 24.5 per cent of the total loans.

Challenge of embezzlement

Officials say fraud is one of main challenges faced by Umurenge SACCOs and must be tackled as the co-operatives look to increase membership.

Mukakarangwa said manual accounting and weak governance is also still a challenge that impedes better supervision.

She was reluctant to reveal the number of fraud cases and the amount embezzled, but confirmed some cases had been reported.

The Umurenge SACCOs overview paper seen by Business Times shows that there are over 167 fraud cases involving over Rwf700 million that are yet to be investigated. The report presented on December 22 in Kigali called for tough measures to tackle this challenge. It added that bad loans had gone up, with 52 SACCOs (13 per cent of the total institutions) had registering NPL ratios above 20 per cent, and 165 with above 10 per cent.

Other key challenges highlighted in the report include manual processes that slow down delivery services, limited products, exclusion from the national payment system and Credit Reference Bureau (CRB), poor governance, inadequate management skills, increasing risk of fraud, high level of errors and inconsistencies in data.

In August during a meeting to address challenges affecting the development of micro-finance institutions in Southern Province, it was revealed that Rwf126 million was lost through embezzlement from Nkomane SACCO of Nyamagabe District. Monique Nsanzabaganwa, the vice-governor of the National Bank of Rwanda (BNR), cited poor management, non-performing loans and the theft of Umurenge SACCO funds as some of the key issues affecting the performance of Umurenge SACCOs.