Defunct Micro-Finance Institutions ‘shouldn’t mean losses for depositors’

Association of Microfinance Institutions in Rwanda has reassured the depositors in any microfinance institution that could collapse following the growth of fund balance in the Deposit Guarantee Fund (DGF) set up to protect them. The Deposit Guarantee Fund (DGF) was established in 2015 with the objective to provide protection to small depositors against risks of losing their deposits arising from failure of a bank or Microfinance Institution (MFI) thereby maintaining public conﬁdence in the banking and ﬁnancial system. According to Central Bank 2018-2019 fiscal year report, the total fund balance as of June 30th, 2019 stood at Rwf3.7 billion. The fund collected Rwf1.4 billion from banks and Rwf138 million from Microfinance institutions in the 2018-2019 fiscal year. Cumulatively collected premiums so far equal to Rwf3.2 billion and Rwf305.5 million from Banks and MFIs respectively since 2015. Interest incomes earned from investing in government securities was Rwf240.4 million as the cumulative interest income is Rwf290.303 million. Central Bank says this improved performance was owing to improved oversight of the funds such as the advisory committee that provide technical advice on daily operations of the fund and the investment committee. The Deposit Guarantee Fund (DGF joined the International Association of Deposit Insurers (IADI) as its 83rd member. IADI is an association created to enhance the effectiveness of deposit insurance systems by promoting guidance and international cooperation. Speaking during the East Africa Microfinance summit and responsible financing day` last week, Aimable Nkuranga, Executive Director of the Association of Microfinance Institutions in Rwanda, cited an example of how the fund will compensate the depositors in the collapsing Caisse des Affaires Financières (CAF) Isonga Ltd, a Rwandan micro-finance institution that had office in Muhanga District. “The former depositors of CAF Isonga will be compensated following its liquidation. This issue happened at the time when there are ready enough readiness in different ways. The central bank’s Deposit Guarantee Fund is ready to compensate whoever deposited in this microfinance institution,” he said. Starting from the day when it was liquidated, clients with not more than Rwf500,000 deposits have to be immediately paid in 60 days according to the law. “In recent days, there has been registration of all affected depositors who present their evidence of being members of the collapsed institution who are getting their refunds,” he said. He explained that clients with more than Rwf500, 000 will get their money in the coming days. “The processing of liquidating the microfinance institutions include recovery of loans it had disbursed to different people, auctioning its properties so that clients with more than Rwf500, 000 be also compensated,” he said. Nkuranga told Rwandans not be discouraged from saving in banks reassuring that there are strong strategies to protect them against any risks. He said the microfinance sector keeps growing as it has recorded 3.7 million clients representing 54 per cent of the 6.2 million adult population with over 16 years old in Rwanda. However, the recent East Africa Microfinance Summit understood that women and youth are still lagging behind in terms of access to financial services in MFIs. The summit discussed on accelerating women and youth economic empowerment through financial inclusion Total assets of MFIs amounted to Rwf313 billion as of June 30 this year, an increase from Rwf279 billion in the previous year. The profits of the microfinance sector increased from Rwf3.2 billion in June 2018 to Rwf6.6 billion driven by improved economic performance that supported increased demand for loans and improved asset quality. Access to financial services was at 80 per cent last, the step in which MFIs played a big role. There are about 457 microfinance institutions across the country. As of end June 2019, banking sector was composed of 11 Commercial Banks, one Development Bank, one Cooperative Bank and three Microﬁnance Banks. Microﬁnance sector was composed of 19 Limited Liability MFIs, 438 Savings and Credit Cooperatives (SACCOs) of which 416 are Umurenge SACCOs and 22 other SACCOs. “The non-performance loans has decreased from 8 per cent to 6.7 per cent as of June. The trend is going down meaning that clients are paying back well the loan,” he said. editor@newtimesrwanda.com

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Defunct Micro-Finance Institutions ‘shouldn’t mean losses for depositors’