BNR tightens supervision of MFIs as bad loans increase

The National Bank of Rwanda (BNR), which is the financial sector regulator, has stepped up supervision of microfinance institutions to curtail the rising ratio of non-performing loans in the sub-sector. According to the central bank monetary policy and financial stability report for the third quarter of the year, the sector’s non-performing loans shot to Rwf6.2 billion at the end of June, up from Rwf5.7 billion during the same period last year. This was an increase of 7.6 per cent compared to 6.8 per cent at the end of December last year. Speaking at the release of the statement on Tuesday, John Rwangombwa noted that the sector’s non-performing loans had ‘slightly’ worsened over the past three months, attributing the situation to the fact that some MFIs secured ‘big’ loans which they could not ably service. He, however, assured the public that there was no cause for worry, saying the central bank would now closely monitor and supervise the sector to improve performance. “We had two central bank staff in charge of Savings and Credit Co-operatives (Saccos) in each district, but they were not effective. However, we have now created teams of supervisors in our provincial branches to strengthen the supervisory role,” he said. Rwangombwa explained that with the oversight of a branch manager, the central bank is confident there will be better results going forward. “It is important that we closely monitor them (MFIs) to see what they are doing, and also deal with other stakeholders to ensure they enforce the contracts and agreements they have.” The micro-finance sector is composed of 493 institutions, including 13 limited companies and 480 Saccos, of which 416 are Umurenge Saccos. The sector plays a critical role in fostering economic development by offering financial services, particularly loans and saving opportunities, to people with limited access to commercial banking services.

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BNR tightens supervision of MFIs as bad loans increase