Rwanda’s Central Bank has said that it intends to monitor micro-finance institutions more closely to improve their operations and management.

The move is part of the several measures being taken to regulate the financial sector after several institutions were mismanaged over the last two years.

According to Pierre Kagabo the Director of Supervision of microfinance at National Bank of Rwanda (NBR), the Association of Microfinance Institutions (AMIR) has been mandated and reorganised to help with self-regulation and best practices promotion among MFIs as well as building capacity.

Other measures to supervise MFIs include the improvement of the legal and regulatory framework in the microfinance sector.

The microfinance law was published, the Central Bank regulations in this sector were improved and a Microfinance Policy which was adopted to guide different interventions in microfinance market.

Also in the pipeline, are the consultations to set up a deposits guarantee fund that would help with the payment of depositors money in case an MFI is in default.

The Central Bank action is seen as a move to prevent previous mistakes where government through the Central Bank had to pay Rwf 1.5 billion to the depositors of the closed MFI’s.

Last year close to 20 MFI’s were closed leaving several managers and executives charged with fraud and mismanagement. Clients’ deposits evaluated at Rwf 3 billion will come from loans recovery and assets of the MFIs.

Kagabo said the liquidation process of the closed MFIs is still on going, and it is at an advanced stage where liquidators are in the process of recovering loans issued.

"The challenges emerged at the stage of distributing that sum of money among depositors because so far there is a remaining balance equivalent to 21 percent which is mainly due to some depositors who gave incomplete information regarding their bank accounts causing their payments to bounce,” he said.

The amount of Rwf 1.06 billion representing 71 percent paid to former depositors of the closed MFIs was disbursed through the Central Bank which is also the regulator.

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