MFIs look to agency banking to improve operations, ease costs

Microfinance institutions (MFIs) are looking to introduce agency banking next year as one of the interventions aimed at helping the sector reduce operational costs and deepen reach. “This will enable MFIs to penetrate more underserved areas and increase access to financial products across the country,” said Association of Microfinance Institutions in Rwanda (AMIR) executive director John Peter Rwema. Rwema said agency banking will enable Umurenge SACCOs, micro-finance banks and other MFIs to reduce non-performing loans “because of improved access to services and the fact that the cost of borrowing could reduce”. He made the remarks on Friday during the association’s general assembly and election of new board of directors. Growth in assets Rwema said the micro-finance sector performance improved generally during the first six months of the year despite an increase in bad loans, with assets growing by 21 per cent to Rwf230.28 billion from 208.95 billion in December last year. However, non-performing loans rose to 7.9 per cent in June, from 7.4 per cent over the same period, while those of Umurenge SACCOs increased to 12.5 per cent from 10.7 per cent. He said the MFIs are working to reduce bad loans to 6 per cent next year. New AMIR board of directors elected Meanwhile, Jules Theonest Ndahayo, the chief executive officer of Umutanguha Finance Company, was elected as chairperson of AMIR, replacing Jean Marie Vianney Nzagahimana. Charles Kayumba, the Duterimbere IMF chief, is the new vice-chairperson, while Chatal Uwamariya was elected secretary. Speaking after being elected, Ndahayo said during his tenure, the association will focus on promoting professionalism, financial inclusion and teamwork. “Because we want all Rwandans to be financially-included, we will make sure that micro-finance institutions promote client needs and tailor-made financial services,” he said. Ndahayo said his team will strengthen financial literacy campaigns and sensitise customers, especially borrowers, to understand the importance of repaying loans in time as one of the ways to help address the challenge of growing non-performing loans,” he added. He noted it is essential for borrowers to understand that a bad financial history affects their chances of getting credit in future. “We are also going to promote electronic payment systems. We are working to develop software that will help members deploy electronic facilities to improve service delivery and reach more Rwandans,” Ndahayo said. business@newtimes.co.rw

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MFIs look to agency banking to improve operations, ease costs