Central Bank warns MFI’s on Non Performing Loans

The National Bank of Rwanda which is also the regulator of Micro-Finance Institutions (MFIs) has said Non Performing Loans (NPL) has been the main challenged to access of credit. This was said by the Governor of the Central Bank Francois Kanimba during a one day workshop on the rules and regulations governing micro-finance institutions at hotel La Palise Nyandungu. MFIs are some of the institutions that central bank monitors and regulates. “On average they (Non-Performing Loans) are 10 percent even below commercial Banks but the variation in different MFI’s has gone beyond 50 percent,” Kanimba said. The credit fund that amounts to Rwf5 billion, established in October, 2009, seeks to boost the activities of the MFIs which include, capacity building, savings and credit. Many MFI’s have not accessed the credit because of poor management structure, and the size of Non Performing Loans. Presenting Law No 40/2008 of 26/08/2008 establishing the organisation of micro-finance activities Kanimba told participants that the law will not spare management of any MFI that doesn’t guarantee the norms of good governance. In article 20 of the law, the central Bank shall determine by regulation, the norms of good governance that must be observed by micro-finance institutions. “The main challenge remains sensitising locals to re-build confidence in MFI’s because of their bad reputation in poor management,” he added. The law also in its Article 15 prohibits whoever exercising micro-finance activities without licensing and authorisation from the Central Bank. Kanimba urged heads of MFI’s to consider Umerenge as a partner in the move to promote the saving culture among Rwandans especially low income earners and not a competitor. Participants were also urged to focus more on financing agricultural projects like those in agro-businesses, processing and production because agriculture has shown a significant role in the country’s economic growth. According to the Chairman of Association of Micro-Finance Institutions in Rwanda (AMIR) Faustin Zihiga, in a bid to fight poor management and lack of professionalism, the association intends to conduct trainings of top officials, and make a a close follow of the daily operations of MFI’s. Ends

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Central Bank warns MFI’s on Non Performing Loans