The central bank has revoked the licences of seven private non-deposit taking financial service providers (NDFSPs) this year, in a move aimed at strengthening compliance and tightening oversight in the credit market.
The affected institutions are Atlas Capital Ltd, Average Lending Ltd, Green Credit Ltd, Panafrican Finance Ltd, Ubumwe Lending Ltd, House of Debt Recovery Rwanda Ltd, and Well Cash Rwanda Ltd.
The decision comes as the sector continues to expand in both the number of players and lending activity. Over the past year, non-deposit taking financial institutions rose to 250, up from 104 in December 2024, following the entry of 140 new institutions into the market.
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Similarly, NDFSPs increased from 104 to 209 over the same period, reflecting sustained growth in institutions offering lending, leasing, debt collection, and other non-deposit financial services, according to last month's Monetary Policy and Financial Stability Statement.
Despite this expansion, the sector's total assets declined by 11 per cent, falling from Rwf112.5 billion in December 2024 to Rwf88.6 billion in December 2025.
According to the central bank, the drop was largely due to institutional restructuring, including the integration of the Business Development Fund (BDF) into the Development Bank of Rwanda (BRD), which removed its balance sheet from the subsector.
However, lending activity continued to grow. Gross outstanding loans increased by 11.4 per cent to Rwf60.7 billion over the same period, pushing the share of loans in total assets to 68.5 per cent, up from 48.4 per cent a year earlier. This reflects a stronger concentration on core lending activities across the sector.
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The report shows that credit growth was mainly driven by rising demand for microloans and the entry of new lending companies.
Agriculture recorded the highest expansion, with outstanding loans rising by 55.7 per cent to Rwf3.83 billion, supported in part by digital lending models targeting smallholder farmers.
Lending to the transport, warehousing and communications sectors also increased by 43.9 per cent to Rwf17.4 billion, largely driven by asset leasing, including financing for electric vehicles.
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At the same time, borrowings within the sector rose to Rwf37.9 billion in 2025, up from Rwf23.8 billion in 2024, making them the largest component of total liabilities.
Despite their growing role in expanding access to credit, industry players say the sector continues to struggle with public perception.
Felix Nkundimana, Chief Executive Officer of Jali Finance, said many people still confuse NDFSPs with informal, unregulated money lenders, despite operating under the supervision of the central bank.
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"People often assume these institutions are not regulated, yet we operate under a clear legal and supervisory framework. This misunderstanding affects trust and limits the sector's ability to scale, even as demand for small-scale credit grows," he said.
According to Nkundimana, regulatory oversight has strengthened the sector's credibility, but compliance requirements remain challenging, particularly for smaller institutions.
He noted that capital requirements, reporting obligations, and operational standards are necessary for stability but may slow the growth of emerging players.
"Regulation is important for protecting consumers and the system, but most institutions in this space are still small. Meeting all requirements at the same pace as larger players can be difficult," he said.
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Nkundimana added that credit reference systems remain a structural challenge, as borrowers from NDFSPs are often assessed in the same risk category as those from larger financial institutions, despite differences in loan sizes and client profiles.
"This affects how risk is priced. The credit scoring framework does not always fully reflect the nature of our clients," he said.
He also pointed to the high cost of developing and maintaining digital banking systems and lending applications, which adds to operational pressures.
Despite these challenges, he emphasised that compliance remains central to the sector's sustainability.
"Institutions that fully comply with regulations, maintain proper reporting, and operate transparently are more likely to build trust and achieve long-term stability," he said.
Jackson Kwikiriza, Executive Director of the Association of Microfinance Institutions in Rwanda, said NDFSPs primarily provide small, short-term loans tailored to clients often excluded from formal banking systems, including informal traders, smallholder farmers, and micro-entrepreneurs.
"For many borrowers, especially in rural and informal sectors, these institutions are the first point of entry into formal credit. Most would not qualify for bank loans due to lack of collateral or formal income records," he said.
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Kwikiriza noted that by financing small-scale businesses, NDFSPs support household incomes and local economic activity, while expanding access for women and youth, who remain disproportionately excluded from traditional finance.
While mobile money and SACCOs have improved access to financial services, he said NDFSPs play a critical role in deepening financial inclusion, despite structural constraints affecting their sustainability.
"A major challenge is access to affordable capital. Since they are not allowed to take deposits, they rely on external funding, which is often costly and reflected in lending rates. Operational costs also remain high, particularly when serving low-income clients in rural areas with small loan sizes," he said.
"At the same time, income volatility among borrowers, coupled with climate-related risks, continues to affect repayment capacity and heighten credit risk."
Kwikiriza added that strengthening the sector will require improved access to affordable financing, greater adoption of digital tools, and increased investment in financial literacy to support responsible borrowing.
