10 October 2012

Rwanda: Banks Should Increase Presence in Rural Areas


The latest report by Finscope shows financial exclusion dropped by 46 per cent since 2008.The report, released last week, indicates that nearly three quarters (3.2 million adults) of Rwandan adults have or use financial products or mechanisms.

This is a stun contrast to 2008 when slightly half of the adults in the country were financially excluded. Currently, only 28 per cent (1.3 million adults) are excluded.

Although 1.3 million adults that don't have or use financial services is still a relatively big number, the Finscope findings reflect that the Rwandan Financial Sector Development Programme (FSDP), which was launched in 2006, is effective.

The programme seeks to develop a stable and sound financial sector that is sufficiently deep and broad, capable of efficiently mobilising and allocating resources to address the development needs of the economy and reduce poverty.

On a positive note, the report suggests that the reduction in financial exclusion was caused by a significant increase in the proportion of adults who have or use a product or service from a formal financial institution.

The increase in the number of banks, microfinance institutions, insurance companies and Umurenge SACCOs has increased access to financial services over the last four years, thus enabling more Rwandans to save and invest.

On the other hand, despite the increase in the uptake of formal financial products, many Rwandans still use informal mechanisms to manage their money.

Such informal mechanisms include savings groups, mainly based in rural areas. These groups are not only mechanisms to save, but also play an important role in terms of social protection.

Yet, in most cases, such community methods do not allow savers to earn interest on their deposits as formal bank account would. And they also lack proper methods of lending. Umurenge SACCOS have tried to address these shortcomings. But they (Umurenge SACCOS) also need to be more aggressive in terms of investing savings from members.

If Rwanda is to meet its targets on financial inclusion for all, then banks should increase their presence in rural areas to supplement such initiatives.

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