Like other economic sectors the Covid-19 pandemic has impacted the microfinance market.
The Association of Microfinance Institutions in Rwanda (AMIR) has instituted various measures to raise awareness about the virus and control its spread in the industry in an effort to safeguard employees and clients.
According to Aimable Nkuranga, AMIR’s Executive Director, the move aimed part of the association’s efforts to promote accountable financing while adhering to consumer protection principles.
Principles of consumer protection include appropriate product design and delivery, prevention of over-indebtedness, transparency, responsible pricing, fair and respectful treatment of clients, privacy of customer data and complaint resolution mechanisms.
With more than 390 members and more than three million clients requiring responsible financing services, AMIR places consumer protection at the forefront of its operation.
Nkuranga says that all MFIs were sensitized and facilitated to embrace the Covid-19 preventive measures. These include observing social distance, measuring client temperature, setting up hand-washing facilities and wearing masks to protect personnel and clients from the virus.
Furthermore, virtual platforms have been established to facilitate communication to disseminate health guidelines for Covid-19 and other guidelines related to serving and protecting clients.
All MFIs showed some of the consumer security standards in their offices, Dos and Don’ts to avoid Covid-19 – which shows accountability and safety for customers.
The association also started online training for MFIs, helping them to leverage work-related meetings on platforms such as Skype and Zoom.
Three training sessions have been held so far and eight sessions remain.
The training also includes empowering AMIR members with adequate technology skills, as well as smart consumer protection practices as a mechanism for adhering to the pandemic situation.
The association plans to set up a toll-free number that consumers can use to inquire about their rights in case of complaints.
“The toll-free number is a communication tool to enhance responsible financing by handling members’ and clients’ complaints and receiving clients’ suggestions during Covid-19 when some people tend to avoid unnecessary travels,” the official said.
The association has also developed an AMIR-SATIS system that helps MFIs record, process, validate and provide direct feedback through direct messages to their clients. This is a Customer Care mechanism that provides periodic reports, helps the management of MFIs to take strategic decisions, and also helps them to comply with the Client Protection Principles of Principle 7 of the Smart Campaign.
The system will soon be rolled out to other members, which is currently being used by eight MFIs including one Umurenge SACCO.
The Covid-19 has brought various financial challenges for MFIs and their customers.
Some MFI clients have been struggling to repay their loans. AMIR encouraged MFIs to offer their customers loan relief.
“Even though lockdown has partially been lifted, some clients in the informal sector are still unable to pay back loans. In order to restructure loan repayment, each pandemic-affected client has been advised to approach their Microfinance Institution as we recommended,” he said.
However, he urged other customers who continued to work during lockdown to pay back without pretense especially those in essential services.
“Those whose loan repayment status was good in February this year are likely to benefit from a package to renegotiate the loan payment grace period,” he said.
Nkuranga said some MFI clients stopped saving because of Covid-19 induced slow economic activity while others withdrew their savings to cater for their domestic needs.
This has caused liquidity issues for MFIs.
“Our assessment revealed that liquidity has decreased. We had to do advocacy and sensitization and this is on course to get a solution,” he said.
The other problem was that many MFIs aren’t automated and cashless payments are seen as part of Covid-19 ‘s solution to spread.
“To address this issue…we are designing a project to help MFIs embrace automation. There is the other project of automating SACCOs,” he said.
The association is currently supporting 11 MFIs to embrace automation in partnership with Access to Finance Rwanda, Nkuranga has said.
AMIR also advocated for MFIs that had branches in various districts to be able to move although travel was banned during the total lockdown.
The other issue is that when banks limited withdrawals to customers, advocacy was done to lift withdrawal limits to MFIs that deposit their money into commercial banks so they can serve their customers.
Restrictions on the compulsory savings accounts were lifted through advocacy.
For example , customers who had not previously been allowed to withdraw money from their savings accounts could now withdraw 75 percent of the savings, Nkuranga said.
With public gatherings now suspended, group loans by MFIs are facing daunting challenges under what is known as the solidarity guarantee.
“We are in discussions so that the government allows savings groups to gather by respecting Covid-19 prevention guidelines and then continue work to save and get loans from MFIs,” he said.
Small and Medium Enterprise response clinics were also introduced in partnership with Access to Finance Rwanda. New policies and financial advisory services and access to information relating to finance are translated into clear and straightforward communication under the intuitive.
Nkuranga said the association had been pressuring the government to include MFIs in the Economic Recovery Fund.
MFIs and SACCOs will now access the Fund and lend to their customers and
Eligible undertakings will have to demonstrate Covid-19 ‘s negative impact on their operations, that they were commercially viable before the pandemic, and that they can return to viability, preserve jobs, and contribute to the economic recovery.
MFIs were allocated Rwf3 billion, though, against their Rwf22 billion shortfall in funding.
We have a duty to raise more funds for MFIs, Nkuranga says , adding that they will use the Government Fund to recapitalize some low-interest – rate virus-hit small business.
Meanwhile, AMIR has warned MFI clients to avoid over-indebtedness to avoid defaults that can drive up non-performing loans and cause losses.
“They have to take loans they will be able to pay back. Otherwise, they will be blacklisted by the Credit Reference Bureau,” he said.
As part of responsible financing, there is an initiative with the Transunion Rwanda the former Credit Reference Bureau to explain to clients about avoiding over-indebtedness.
The official clarified that if a client is blacklisted by the Credit Reference Bureau, it takes seven years for banks to recover trust.
John Bosco Kabera, the Bureau ‘s Manager of Business Development explained that over-indebtedness triggers a lack of ability to pay back loans.
Thus, during these times of the Covid-19 pandemic, we urge the affected clients to approach banks for restructuring the loan payment rather than hiding. They need to know that banks have approved a three-month grace period to pay the loan back, “he said.
Others have not been affected but masqueraded as being affected by Covid-19 and have refused to pay back loans. They risk being listed down negatively, he noted.
He urged those who still need loans to avoid over-indebtedness.
