When they were first established, the savings and credit cooperatives (Umurenge Saccos) were expected to enhance access to finance and boost financial inclusion at the grass roots level. However, to further improve efficiency, Umurenge Saccos have embarked on an ambitious plan of data cleaning and asset consolidation before they can merge to form district credit cooperatives across the country.

Under the new plan, all Saccos countrywide will form one Sacco at the district level to minimize cases of financial losses, and this will not change the terms of services offered to members.

The process will see the creation of more than 30 district Saccos that will then participate in the formation of a cooperative bank through buying shares, Jean Pierre Uwizeye, the head of capacity building and financial education at Association of Microfinance institutions in Rwanda (AMIR) told Business Times.

Modern high tech software, which will help with automation, is due to arrive in the country to further fast track the process.

"We have requested them to have the technology customised within our local context to be more effective,” said Uwizeye. Sources at Rwanda Cooperative Agency (RCA) revealed that the cooperative bank is expected to be up and running by the end of this year.

In 2015, government announced it was moving to help Umurenge Saccos at sector level to consolidate assets and form District Saccos. According to the plan, the idea is to have all Umurenge Saccos embrace automation before they can merge and after consolidate their assets at district level.

All Saccos according to RCA are required to implement automated systems, which will enable them to work with the bank.

Gilbert Habyarimana, the RCA new Director General, said the project is on track with all the key actors working around the clock to have the coop bank fully operational soon. Enhancing efficiency Sector experts have said the formation of the cooperative bank will help grassroots based savings and credit institutions (Saccos) to upgrade status to boost access to finance, especially among small-and-medium businesses.

They say the move could actually help boost financial inclusion thereby propelling Rwanda towards its journey of becoming a middle income economy.

The experts say the establishment of a cooperative bank is key in terms facilitating the central bank to easily supervise the 416 Saccos across the country on a regular basis.

The co-operative bank is to ensure that Rwandans who access financial services through Umurenge Saccos can be served like those with bank accounts.

John Peter Rwema, the executive director of AMIR said the move will ensure efficiency and sustainability in service delivery.

"For the microfinance sector, it means we shall have strong, efficient and sustainable institutions that will increase both access and usage of financial services by the sector’s clients,” Rwema told Business Times.

Besides, more microfinance institutions (MFIs) are currently embracing innovative technologies as the sector moves to enhance operations and reporting mechanisms.

Both AMIR and its stakeholders have been supporting MFIs to acquire new software that will enable them to automate their systems and improve efficiency and transparency.

This is because experts believe the sector plays a critical role in fostering economic development by offering financial services, particularly loans and opportunities for savings to people with limited access to commercial banking services.

Initially, the project was to create a co-operative bank only comprising members of Umurenge Saccos but it will instead work as a commercial bank.

Acquiring shares

Meanwhile, once established other co-operatives which are not Saccos will also have a chance to own shares in the bank. Investors, too, will be allowed to buy shares to enable the coop bank run effectively and efficiently.

The bank will connect members of Saccos with other banks through a financial payment system which is linked to all banks and the central bank, said RCA officials.

According to Augustin Katabarwa, the chairman of the National Cooperative Confederation of Rwanda (NCCR), many cooperatives are still lagging behind in ICT, especially in the services offered by Saccos.

"The Saccos and cooperatives play a critical role in fostering economic development by offering financial services – particularly loans and opportunities for savings – to people with limited access to commercial banking services,’’ he said.

More growth registered

According to the central bank latest statistics, Rwanda’s microfinance -sector continued to play an important role in the country’s financial development agenda.

According to John Rwangombwa, the governor central bank, sector remained solvent, liquid and continued to finance the economy as expected during the first half of 2017.

And in terms of actual performance, total assets of the microfinance sector stood at Rwf248 billion as at the end of June 2017, indicating a year-on-year growth of 7.6 percent, compared to 22.8 percent growth registered same period last year.

However, there was a slowdown of growth of microfinance assets during the period under review mainly caused by a reduction in deposits and an increase of credit risk (none performing loans).

In 2014, the industry adopted a new app to help MFIs monitor performance and data collection across the microfinance sector. The performance monitoring software application (PMT) was touted to enhance transparency and efficiency within microfinance institutions. The technology also sought to ease access to credit by the rural poor and help create a one-stop centre for data collection of all credit institutions at AMIR headquarters in Kigali. However, despite the progress, growth of MFI deposits stagnated at about 5.9 percent (year-on-year), from 20.1 percent registered same period 2016. Equally, the increase of NPLs in the sector during the first half of 2017 also affected the growth of MFI assets. More challenges

According to central bank, Umurenge Saccos, which have deeper outreach in rural areas were significantly affected by the weak performance of the agriculture sector.

There is therefore hope that through consolidation and automation, these Saccos could become more relevant in terms of scaling up access to finance in rural areas. To realise the objective the central bank, in collaboration with other stakeholders are currently working on the strategy to boost the savings culture in Rwanda and increase the financial literacy awareness which could equally make this particular sector more competitive.

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