David Kezio-Musoke
14 October 2008
Kigali — Rwanda has launched a mutual guarantee fund which will ensure collateral security to microfinance institutions (MFI) in the country.
The fund which is worth about $1.02m (Frw 513,400,000) and referred to as Societe Mutuelle de garantie pour le reFinancement (SMGF), was officially launched early last week at the Kigali Serena Hotel.
Francois Kanimba, the Governor of the National Bank of Rwanda (BNR), the institute that regulates all financial institutions in Rwanda, said SMGF would garner for enough money to assist the juvenile micro finance institutions in the country.
SMGF was incorporated in March this year with an initial capital of and was authorized by BNR May.
Mr Kanimba, who presided over the function said the company's objective is to support MFIs to mobilize resources to refinance their portfolios by offering guarantees to commercial banks so that they can easily lend to MFIs.
SMGF will offer guarantees to cover borrowings by MFIs and provide guarantee facilities for up to 2 years. Early this year Rwanda government earmarked over $23m (Frw13b) for the development of MFIs. This fund according to government officials would help the institutions in the credit line and managerial skills.
The credit aspect would be managed by Rwanda Development Bank of (BRD) where MFIs would access it at an interest rate of 6 percent and give it out at an interest rate not above 15 per cent. About $24m (Frw 12b) will be used as credit line, while $3.4m (Frw1.7b) will help build capacity through training to improve managerial skills.
Up to $4m (Frw2b) will be disbursed this year alone, and officials say the amount will be increased gradually as absorption capacity increases over the next five years.
Currently, MFI outreach in Rwanda is placed at 600, 000 people unlike commercial banks with 200,000. Some of the challenges MFIs are facing include lack of professionals, collaterals, weaknesses in portfolio management and limited funding.
Rwanda's government is targeting MFIs because, according to the nation's monetary policy statement released by the central bank recently, MFIs show satisfactory performance in the areas of governance, consolidation of their equity capital and positive operational profits.
To access this money, an MFI will be required to have among others, less that 5 percent non performing loans, 60 percent of the loan portfolio in rural areas, and the maximum loan will be 20 percent of the their deposit. "We are giving this grant at zero interest rate but what we are targeting is a positive impact on all aspects of economic development," said James Musoni, the Minister of Finance and Economic Planning.
According to Ndahimana Emmanuel the Director General of SMGF, the company is an association which includes banks , four MFIs, the private sector federation (PSF), the Federation of MFIs in Rwanda(AMIR) and AQUADEV which deals with the management of micro financing using PDAs in isolated regions of Rwanda.
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