Capacity Building to improve MFI’s service delivery 

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Capacity Building to improve MFI’s service delivery

Building the capacity of the Microfinance institutions would help   improve service delivery and bank the unbanked populations that cannot be served by commercial banks, experts have revealed.

The Microfinance sector, which hi regarded as the alternative financing is at the helm of spurring the financial inclusion for all mainly in rural and peri- urban areas that cannot access services   form banks.

But, experts say that the  current  challenges  that    cripple their service delivery  such  as lack of managerial skills, inappropriate  products  as well as low levels of  loan   management  would be solved by increasing their ( MFIs) capacity.

“The market is there and the will for MFIs to bank the unbanked populations is also there but what is lacking is the technical skills of how to do it,” said Brita

The sector has been struggling to bring  down  non-performing loans  well  as  widen their  profit  margins  and cut down   operational  costs but this has been taking a snail  pace.

Accordingto CentralBank statistics, the sector   registered an increase in its Non-Performing Loans ratio to 7.6% at end June 2014 compared to 6.8% recorded at the end of December 2013 which was due to large number of defaulters that   big MFIs recorded over the period under review.

The  increase in the number of defaulters experts say is  partly due to  the  lack of technical skills  by loan officers of these  MFIs to  carry out  loan  appraisals and assess the capacity of the  borrower to  pay  back.

“ some of the contracts are  hard to be  understood by ordinary  person and loan officers do not  go step  by step to explain  before granting  the  loan  to  the borrower so that this person  knows the risks,”  Rita Ngarambe  the  Executive secretary  of  the  Association of Microfinance  Institutions in Rwanda-AMIR said

Through Capacity building, microfinance players say the sector will be able to up its performance thus include more populations and extend credit to micro and small and medium enterprises that are in dire need of credit to   grow.

The sector  that  includes  Savings and credit cooperatives registered a positive performance  in the first six months of the year  with  asset size increasing by 14.5% rising to Rwf147.4 billion in June 2014  from  rwf128.7 billion by  end  of December 2013.

While  the  sector’s Capital Adequacy Ratio (CAR) stood at 31.9% above the  minimum regulatory requirement of 15% and liquidity ratio at  86.2% in the  first six  months of 2014 which is, an impressive  performance that the MFIs are  boost   access to  finance.

“ We  have  already  started training   loan  officers  on loan appraisals and also the senior  staff and  board members  on management  skills,”  Ngarambe noted   that  long term training will be done by the  newly established   capacity  building institutions for  microfinance.

Accordingly, the Rwanda Institute of Cooperatives, Entrepreneurship and Microfinance (RICEM) will provide technical knowledge to Microfinance, Saccos as well as Small and medium enterprise technical knowledge to help them grow and thrive.


About the author

Olive Ndaka is the Junior Editor for RwandaEye. An investor and young entrepreneur, she is a quick learner and has contributed many articles for RwandaEye in Kinyarwanda.

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