KIGALI - The Government has earmarked over Frw13 billion for Micro Finance Institutions.

The support will help the institutions in the credit line and managerial skills.

The credit aspect will be managed by Rwanda Development Bank of (BRD) where MFIs would access it at an interest rate of 6 percent and give it out at an interest rate not above 15%.

Frw 12b will be used as credit line, while Frw1.7b will help build capacity through training to improve managerial skills.

Up to Frw2 billion will be disbursed this year alone, and officials say the amount will be increased gradually as absorption capacity increases over the next five years.

The Government is targeting MFIs because, according to the national monetary policy statement released by the central bank recently, MFIs show satisfactory performance in the areas of governance, consolidation of their equity capital and positive operational profits.

To access the money, an MFI will be required to have among others, less that 5 percent non performing loans, 60 percent of the loan portfolio in rural areas, and the maximum loan will be 20 percent of the their deposit. Addressing managers of MFIs and cooperatives last week, the Minister of Finance and Economic Planning, James Musoni, warned them against abuse and mismanagement of the grant. He said errant managers would be held responsible, and cited recent arrests of 15 people suspected of causing huge financial losses to a number of MFIs. "We are giving this grant at zero interest rate but what we are targeting is a positive impact on all aspects of economic development," he said. The move is expected to help cut poverty levels, create jobs, encourage the culture of saving and increase MFI outreach. Currently, MFI outreach is put at 600.000 people unlike commercial banks with 200.000 people who are mainly Kigali City and in other towns across the country.

François Kanimba, the Governor of the National Bank of Rwanda (BNR), said strong measures are in place to fight misuse and abuse of clients’ deposits.

"Some of the MFIs used to have higher lending levels than their capital and clients’ deposits would be used for salaries and operating costs," he said. He added that discussions are ongoing between the central bank and Simtel to integrate MFIs into the electronic financial transactions.

Some of the challenges MFIs are facing include lack of professionals, collaterals, weaknesses in portfolio management and limited funding.

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