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Role of SACCO in Rwandan Financial Inclusion

Role of SACCO in Rwandan Financial Inclusion. THE RWANDAN UMURENGE SACCO PROGRAM. NGABONZIZA Gerald EXECUTIVE SECRETARY NATIONAL COOPERATIVES CONFEDERATION OF RWANDA (NCCR). NCCR background. The NCCR was established on 28 October 2010 Nine Cooperatives Federations

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Role of SACCO in Rwandan Financial Inclusion

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  1. Role of SACCO in Rwandan Financial Inclusion

  2. THE RWANDAN UMURENGE SACCO PROGRAM NGABONZIZA Gerald EXECUTIVE SECRETARY NATIONAL COOPERATIVES CONFEDERATION OF RWANDA (NCCR)

  3. NCCR background The NCCR was established on 28 October 2010 • Nine Cooperatives Federations • Granted legal entity by the legal personality certificate no RCA/1333/2010 of 22 December 2010 • Published in official gazette N° 25 of 20/06/2011.

  4. vision of NCCR • Promote the Rwandan Cooperative Movement • Protect the Interest of its members in accordance with the • Principles governing cooperative movement.

  5. How the Cooperative Sector operate in Rwanda?

  6. COOPERATIVE MOVEMENT STRUCTURE 1 APEX OF COOPERATIVES 15 FEDERATIONS 148 UNIONS 9046 Primary Coops

  7. THE EVOLUTION OF UMURENGE SACCO SACCO as a government initiative aimed at increasing the financial inclusion to Rwandan citizens?  The concept of Umurenge Savings and Credit Cooperatives (Umurenge SACCOs) was based on an understanding that banks and other financial institutions were more concentrated in urban areas whilst the majority of the Rwandan population lives in rural areas and totally excluded from the formal financial institutions. (MINECOFIN, 2009)Umurenge SACCOs was established in 2008 with the aim to boost up rural savings and provide Rwandans with loans to improve their earnings and enhance their livelihoods.The Fin Scope 2008 and 2012 surveys have revealed that in 2008 21% of Rwandans, 18 years or older, were using formal financial institutions.This percentage has increased to 48% in 2012. Before 2008, among the half million who are banked in Rwanda, 97% were holding a bank account at UBPR (BanquesPopulaires) and within 3 years, Umurenge SACCOs multiplied by 5 the number of banked people and have an impact on households representing more than half of the total population.

  8. U-SACCO IN FINANCIAL INCLUSION In 2008, only 48% of adult Rwandans were financially included (FinScope 2008) To address the issue of financial exclusion, the Government of Rwanda initiated the Umurenge SACCO program in 2009, establishing a sector-based SACCO in each of the 416 Imirenge. The Umurenge SACCO program had the following objectives: • To increase financial inclusion: provide access to financial services also in rural areas; encourage uptake and usage to serve the Rwandan people who were not addressed by classical financial system • To enhance savings mobilization and savings culture in Rwanda • Ultimately: poverty reduction in Rwanda In 2016, 89 % of adult Rwandans were financially included and a large portion of the increase can be assigned to the establishment of Umurenge SACCO program (FinScope 2016)

  9. Savings and financial inclusion • There are 437 SACCOs in the country where 416 are U-SACCOs; • According to FinScope 2008 study, only 48 % of adult Rwandans were financially included; • As a results after the establishment of U-SACCOs, FinScope 2016 report revealed that 89% of adult Rwandans are financially included and a large portion of the increase can be assigned to the Umurenge SACCO program. • Savings in SACCOs is over 67.3 billion frw from which 63.8 billion frw are saved in U-SACCOs. • All disbursed loan in U-SACCOs from 2009 to August 2018 is over 269.5 billion frwwhere 71% was given to males and 29% to females

  10. U-SACCO STRATEGY AND ENABLING ENVIRONMENT. • Vision 2020 Rwanda’s development is guided by vision 2020 (MINECOFIN, 2000), a Government long term development program launched in 2000. Its main objective is to transform the country into a knowledge-based middle-income country, thereby reducing poverty, health problems and making the nation united and democratic. • Rwanda’s Economic Development and Poverty Reduction Strategy II (EDPRS II) provides a medium-term framework to achieve the country’s long term development aspirations as embodied in Rwanda Vision 2020, the seven year Government of Rwanda (GoR) program • The Financial Sector Development Plan, that was developed to enable the implementation of Rwanda Economic Development and Poverty Reduction Strategy (EDPRS II). The main objective of the FSDP is to develop a stable and sound financial sector that is sufficiently deep and broad, capable of efficiently mobilizing and allocating resources to address the development needs of the economy and reduce poverty.

  11. Cont.. • National Financial Education Strategy, a bid to promote financial inclusion (one of four pillars of FSDP), the Ministry of Finance and Economic Planning (MINECOFIN) and the National Bank of Rwanda (BNR), with support from Access to Finance Rwanda (AFR), have developed the National Financial Education Strategy in 2013. The main objective of NFES is to improve the financial capabilities of Rwandans so that they can make appropriate financial decisions, including what financial services they use, depending on their context . The NFES is targeting 6 market segments: children, youth, urban adults, rural adults, women and staff of Financial Service Providers (FSPs). On the supply side, the government wants to promote the consumer protection principles. • The performance contract (Imihigo) for financial inclusion and financial sector development. • National Dialogue Meeting held in December 2008 recommended the creation of at least one SACCO at the level of each Administrative Sector (UMURENGE). • Political will to establish a sound financial sector and put place a cooperative bank to serve other cooperators in the sector with relevant financial products.

  12. CURRENT PERFORMANCE OF UMURENGE SACCOS ON MEMBERSHIP NOVEMBER 2018

  13. PERFORMANCE OF UMURENGE SACCOS IN FINANCIALS, NOVEMBER 2018

  14. OTHER PERFORMANCES, NOVEMBER 2018 Key achievements • Accessibility of financial services • 416 U-SACCOs with 119 branches or outlets (a total of 535 services points across the country) • 90% of Rwandans now live within a 5 km radius of an Umurenge SACCO, 56% within a 3 km radius • Retained earnings of Rwf 25.4 billion end of November 2018; • Profit of the year Rwf 3.4 billion end of November 2018; • Liquidity Rwf 63.7 billion end of November 2018; • Construction of premises – at least 393 out of the 416 now own their premises • Employment opportunities – employ 3,328 staff of which 45% are female

  15. WHAT CAN ETHIOPIAN SACCO LEARN FROM RWANDAN U-SACCO. • SACCOs have to increase Savings by initiating adequate savings mobilization strategies, product design and development and marketing strategies. • To minimize the rate of delinquent borrowers, SACCOs should put in place adequate measures in loan management right from the application process up to loan disbursement and recovery. For instance, Network of a regulatory framework that could help these institutions to identify doubtful and untrustworthy members who come for loans. • Intensify the supervision of SACCOs, punishing the suspect and recovering the embezzled funds in order to increase the people’s confidence in SACCOs. • To enhance good governance in these institutions, SACCO organs should comply with Cooperative law, internal regulations etc. • To put in place strong strategies of loan recovery.

  16. MAJORCHALLENGES • limited products and services available to customers • Low usage ICT in the daily SACCO operations and performance and Manual processes slow down service delivery • Exclusion from the national payments system • High level of increase of embezzlements • Reporting challenges • High level of errors and inconsistencies in data which impedes decision making • Inadequate skills of management and staff • Weak governance systems • Stand-alone U-SACCOs: not operating in network • Weak internal controls

  17. WHAT CAN BE LEARNT BY ETHIOPIAN POLICY MAKERS AND LEADERS. • Development of the financial inclusion strategy for the implementation of national (Ethiopian) financial policies through SACCO. • Promotion of saccos in line with the national development agenda to streamline the financial needs for the economic development. • Embracing financial products tailored to the needs of the citizens • Developing a financial education strategy for the citizens and particularly the cooperatives members as key clients of SACCO.

  18. RECOMENDATIONS • Computerize and professionalize of SACCO sector thereby strongly increasing formal financial inclusion that is Automation and consolidation to solve the challenges that were highlighted in the above. • Decentralization of SACCO to the low levels of administration to embrace proximity especilly to the rural clients where commercial banks does not serve • SACCOs have to increase Savings by initiating adequate savings mobilization strategies, product design and development in many and marketing strategies.

  19. RECOMENDATIONS • enhance good governance in these institutions, SACCO organs should comply with Cooperative law, internal regulations etc. • Revision of SACCO sector development strategies like to ensure Human Resource development for the sector, adaptation of IT, harmonized policies and procedures. • National Apex: formation SACCO Federation for integrated & sustainable SACCO sector development, • SACCO Led Cooperative Bank

  20. Cooperative ensures Fair Market Economy for All

  21. Amesseginalehu

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