Poor infrastructure frustrates efforts by MFIs to penetrate rural areas

Efforts by Microfinance Institutions (MFIs) to take financial services to rural communities are being undermined by poor infrastructure, according to the Association of Microfinance Institutions in Rwanda (AMIR).Faustin Zihiga, the Chairman of AMIR said poor ICT infrastructure poor road-networks, lack of internet connection and lack of electricity in some rural areas increase the cost of doing business. He said this pushes interest rates higher, a phenomenon that tends to result in high levels of non-performing loans. “We are talking with all stakeholders to play their roles. On the other hand government is implementing the rural electrification programme, which in the near future will be a solution to the ICT problem,” he said.In Rwanda most commercial banks have avoided or failed to offer affordable cheap and sustainable financial services to the rural poor despite government’s efforts to boost financial inclusion for all. Thus, the rural folks have had to rely on MFIs and of late Savings and Credit Cooperatives (SACCOs) for credit and other financial services.But despite limited access in the rural area, AMIR is pleased by the reduction in the rate of non-performing loans within MFIs.According to central bank figures, the rate of non-performing loans in MFIs decreased to 9.7 per cent in June, this year, from 12.9 per cent in December last year, thanks to improved risk management practices by industry players.Edith Mukakibibi, the Senior Credit and Operations Manager at Vision Finance Company Ltd (VFC), they have been able to reduce the number of the non-performing loans by creating a loan recovery department.

News

Poor infrastructure frustrates efforts by MFIs to penetrate rural areas