The association of Microfinance Institutions in Rwanda (AMIR) has urged key sector players to design appropriate products to improve consumer protection and reduce losses both clients and financial institutions. According to Jackson Kwikiriza, Senior Programme Manager at the Association of Microfinance Institutions in Rwanda (AMIR), lack of consumer protection policies leads to losses for both clients and microfinance institutions. Sector experts say it is one of the ways to cut non-performing loans which increased to 12.3 per cent as of June 2017. “Microfinance institutions provide financial services to many clients especially those who cannot access big banks as they deal with smaller amounts of money. These microfinance institutions contribute a lot to national economic development. If their clients are not well served, it could lead to losses on both sides and to national economic growth,” he said. There are about 470 microfinance institutions across the country, 416 Umurenge SACCOs, 38 SACCOs owned by cooperatives most of which are in agriculture sector. These operators serve over 2.8 million customers across the country. MFIs offer financial inclusion opportunities to the rural population. The total number of accounts in MFIs increased to more than 3.4 million by December 2017 growing the sector’s total assets to Rwf244 billion according to Central Bank statistics. “These particularly serve low income earners which means they are promoting inclusive finance that lifts them out of poverty. For better service delivery, they need to put in place and adhere to consumer protection principles. These include affordable interest rates,” Kwikiriza said. Straton Habyarimana, of SEEP Network, a non-profit organization working with Associations of Microfinance Institutions recommends that MFIs should design appropriate products and delivery based on the needs of clients. “Financial institutions should design financial products that respond to the needs of each client. Banks should not think for them without consulting them. If not, this situation could lead losses to both sides,” Habyarimana said. He explained that there are seven principles that ought to be adhered to which include; designing appropriate products, prevention of over-indebtedness ensuring transparency to clients by displaying tariffs, interests’ rates and understandable language to all categories of clients among others. Other protection principles, he said include responsible pricing, fair respectful treatment of clients, privacy of clients’ data and mechanisms of handling clients’ complaints. “If a client fails to pay loan on time due to different disasters, the quick solution is not rushing to auction the collateral. A financial institution can take alternative solutions such as loan scheduling, loan refinancing and removing penalties. Again, before providing loans, banks should do analysis of reimbursement capacity to avoid failure to pay back the loan,” he explained. editorial@newtimes.co.rw
