Government’s efforts to tackle poverty are bearing fruits courtesy of the fast growth of the microfinance sector. According to statistics, loans disbursed through the sector rose by 25 per cent in the first six months of 2012. By the end of June 2012, a total of 362 out of 416 saccos were fully licensed, up from 139 at the same period last year. The microfinance sector is comprised of microfinance institutions and savings and credit cooperatives commonly known as saccos.A recent monetary policy statement indicates that gross loans increased by 25.7 per cent to Rwf51.7 billion from Rwf40.7 billion, while deposits increased by 23.3 per cent from Rwf45.8 billion to Rwf56.5 billion, from December 31, 2011 to June 30, 2012.The performance of microfinance institutions is mainly attributed to the growth of UMURENGE SACCOs. Umurenge SACCO is a government initiative as elaborated in the Vision 2020 development agenda that aims to increase access of financial services to citizens. The total assets of Umurenge Saccos increased by 22.2 per cent from Rwf77.4 billion to Rwf94.6 billion by June this year.The microfinance policy was introduced as an addition to the other types of small and medium financing as a result of the country’s enthusiasm to bring down poverty to acceptable levels through access to financial services.According to Joseph Museruka, the Managing Director of Umwalimu Sacco, a teachers’ savings and credit cooperative, his sacco is registering fast growth while its structure is ever-changing."We work closely with local leaders especially at the district level and we intend to go down to the sector and cell levels to reach out to as many clients as possible,” he says. The sacco initially gave members a maximum loan of Rwf3m which has since increased to Rfw15m.Out of the 60,000 teachers in the country, 36,000 are registered members of the cooperative with over 34,000 benefiting from its loaning scheme.The main advantage of saccos is their low levels of nonperforming loans that reduced from 12 per cent to 8.3 per cent by June this year. The Umurenge Saccos registered a decline of 2.6 per cent in the NPL rate at the end of June 2012 from 5.6 per cent at the end of December 2011, while that of other MFIs stood at 9.7 per cent decreasing from 12.9 per cent at the same period.Elimination of nonperforming loansTo reduce the rate of nonperforming loans, Museruka says Umwalimu Sacco hired lawyers to follow up on clients defaulting on loan repayment."Once they get to know a lawyer is following up their case, they pay because they fear measures that may be taken after failure to pay,” Museruka said. He added that the sacco works with districts to channel the salaries of those who changed jobs or location.Central bank figures show that as of June 2012, Umurenge sacco deposits accounted for Rwf30.2 billion against Rwf22 billion while gross loans were up at Rwf10.0 billion from Rwf4.7 billion at the end December 2011. Total assets increased by 40.6 per cent to Rwf40.8 billion June 2012 as opposed to Rwf 29 billion during the same period last year.The Managing Director of Inkigi microfinance, Delphin Ngamije, says the sector has built confidence because of enhanced operations and general management.According to Ngamije, MFIs have built capacity through different trainings in loan analysis and management of portfolio at risk."We enhanced our risk management system and loan analysis with a specific department on risk management,” he notes. Also a department responsible for studying and approving loans of above Rwf6 million was established. In a bid to continuously operate the low ratio of non performing loans, he said, they work closely with local leaders and police by providing them with a list of defaulters and jointly follow up on the dossier of each client.Strong measures are also taken upon employees who reportedly approve loans based on their relationship with a client."The system is computerised and centralised thus monitoring all activities being done by our branches across the country,” he points out.Better standards of livingThe high growth of the microfinance sector has fuelled expansion of private enterprises and facilitated job creation among the poor thereby allowing wealth creation to trickle down to low income groups.The Director General of Rwanda Agricultural Board, Alex Kanyankole says the microfinance sector has significantly helped rural communities especially farmers to purchase agriculture inputs and other tools to boost production."Because of the loans, production per tree has doubled and we have seen farmers replacing old trees,” Kanyankole observes.Jeremie Iyakaremye, a farmer and head of coffee farmers’ federation in Kirehe District says that through Saccos and microfinance institutions, farmers have managed to save and improve their farms."I channel the salary (Rwf50, 000) of my worker to a Sacco and because of this, he manages to get small loans to buy fertilisers or anything that could help improve his farm or life,” he explains.According Iyakaremye, many farmers show willingness to save unlike before when they were hesitant to embrace the initiative. "In brief, it came as a solution to integrate the poor to the system and allow them to benefit from the expansion in economic activities, trading and wealth creation,” he says.The federation he heads is involved in processing and adding value to coffee in Kirehe District.Financial inclusivenessAccess to financial services is key to mobilising resources and enhancing the savings culture thus contributing to inclusive growth.Formation of Savings and Credit Cooperatives at the sector level has helped more Rwandans to access formal financial services.The number of Rwandans accessing formal financial services increased to 42 per cent of the adult population from 21.1 per cent in 2008.A study conducted by FinScopeRwanda indicates that the number of the adult population accessing informal financial services increased to 29.8 per cent from 26.4 per cent in 2008, which means that 71.8 per cent of Rwandans are financially included.The statistics also indicate that government is in line to attain its target of 80 per cent of the population getting access to financial services by the year 2017.Central bank says the good performance is also driven by enhanced supervision with onsite supervision being conducted by BNR personnel in collaboration with district inspectors.