The majority of microfinance institutions customers do not know their rights, a situation that exposes them to risks and also affects efforts geared at deepening financial inclusion, experts from micro-finance institutions have said.

They added that lack of customer protection by financial institutions was also hampering service delivery. This was during a training workshop on how the component of consumer protection principles can be incorporated into the other principles governing microfinance institutions (MFIs). The training brought together experts and consultants in microfinance institutions, as well as managers of microfinance institutions.

The Association of Microfinance Institutions of Rwanda (AMIR) is currently implementing the Responsible Finance through Local Leadership and Learning Programme (RFL3) in Rwanda. The programme, which seeks to scale up the application of consumer protection principles for low-income financial service customers in Rwanda microfinance sector, is being implemented in partnership with SEEP Network and the MasterCard Foundation.

Under the programme, AMIR will promote the integration of client protection principles (CPPs) in the new business plans of the 30 district Umurenge Savings and Credit Cooperatives (U-SACCOs) that are in process of being formed, officials said.

Similarly, in collaboration with Rwanda Institute of Cooperatives, Entrepreneurship and Microfinance (RICEM), AMIR is advocating for the revision of some of RICEM training modules to become client protection-centric, according to Jean Pierre Uwizeye, the senior programmes manager at AMIR.

Uwizeye said microfinance institutions need to understand that it is their responsibility to respect and protect customer rights in all forms.

"We need to recognise that we are still at a very low level of protecting consumers. Besides, most people don’t know their rights and never ask for better services from financial institutions,” he said on the sideline of the workshop on Friday in Kigali.

He said many borrowers request for loans from microfinance institutions or banks and sign contracts without getting fully involved in the process or even reading the contracts.

He noted that before signing a loan deal, customers must first understand all the issues, which "are in most cases ignored, exposing the borrower to risk in case of any eventuality”.

"If you take a sample of five people at a bank, the majority will tell you that when they apply for a loan and get it they will sign the contract without reading it or asking about the interest rate and how it is calculated. They just sign the document because they need money,” he noted.

The official said it is crucial for clients to understand how banks or SACCOs set their interest rates, say 17 per cent or 19 per cent.

"Customers should have capacity to calculate the interest rate and understand the other issues about the loan. However, SACCOs and bank officials rarely explain everything about their products and borrowers never ask,” he added.

Uwizeye said it is the responsibility of financial institutions to educate and provide clients with all the necessary information "besides advising them on their rights to know everything about the service they are being offered,” noted

MFIs react

Customers say they often do not understand the services and products offered by MFIs and banks as they are never given enough information about them.

Commenting on the issue, one of Umurenge SACCO manager who preferred not to be named  said banks serve many clients and are mostly understaffed, especially for SACCOs and MFIs.

"So, we find it hard to explain to every client who seeks services from us. Moreover, some people still think that getting a loan is a favour. This should change and bank employees should know it is the right of a client to get informed and be protected,” said.

An official from central bank told The New Times that the bank is working on a client protection law which will, not only protect clients in banks, but also in insurance companies and forex bureaus, among others

The microfinance sub-sector is an integral component of Rwanda’s financial system that plays a critical role in driving financial inclusion by connecting the rural population and low income groups to financial services. There are 472 microfinance institutions sharing over three million account holders between them.