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The Rwandan Microfinance sector began to develop in 1975, and experienced rapid growth from the late 1990s. This growth has been attributed to a large inflow of donor funds directed towards relief oriented microfinance initiatives (following the genocide in 1994), as well as the provision by the Government of Rwanda of credit lines and grants to the microfinance sector to fast-track reconstruction. This rapid growth occurred in an unregulated system and ultimately led to instability within the sector, prompting the Government to launch a financial sector reform programme in 1995. However, in 2006 the limited success of these reforms was made apparent by the collapse of 9 MFIs that lead to 195 000 depositors losing their savings. This caused the Government to adopt a formal National Microfinance Policy, accompanied by an implementation strategy, in September 2006.
To strengthen the microfinance sector and better protect public deposits, a specific microfinance law (Law No. 40/2008) was adopted by the Rwandan parliament in August 2008, followed by the publication of a new BNR Instruction for MFIs (No. 02/2009). The law defined the National Bank of Rwanda (BNR) as the main regulatory body overseeing the microfinance sector. According to the BNR, the total number of MFIs declined in December 2016 to 472, from 494 in December 2015. This decline is due to the restructuring of networks of SACCOs that changed their legal status to two limited liability companies. Ten SACCOs were also liquidated and their depositors refunded by the Government in December 2016. Of the 472 MFIs operating in Rwanda, 17 have limited liability company status; 455 are SACCOs: these include 416 Umurenge SACCOs and 39 non-Umurenge SACCOs.
The MFI sector balance sheet continued to expand in 2016, with total assets of the sector increasing by 6,6% in December 2016 to FRW 223 billion. This is significantly lower growth than the 31% increase in assets in 2015. The slowdown of growth of microfinance assets was partly explained by Rwanda Social Security Board’s (RSSB) decision to transfer “Mutuelle de santé” funds from Umurenge SACCOs to accounts in its banking division for better management of these funds with automated operating systems. A total of FRW 13 billion was transferred.
The share of loans over total assets of the sector increased from 53% in December 2015 to 57% in December 2016. The reduced pace of lending from MFIs is due to an increased vigilance surrounding prudential lending caused by credit risk concerns arising from poor agricultural performance in 2016. However, agriculture remains a key lending sector for MFIs and accounts for 30% of Umurenge SACCO loans and 15% of total MFI loans.