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MFIs REFINANCING October 2009

MFIs REFINANCING October 2009. By : Christine KARANGWAYIRE BRD Director of Investments Department. BRD MFIs Refinancing Introduction.

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MFIs REFINANCING October 2009

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  1. MFIs REFINANCING October 2009 By : Christine KARANGWAYIRE BRD Director of Investments Department

  2. BRD MFIs RefinancingIntroduction To support Microfinance sector, the GoV established the credit and the capacity building funds. The capacity building fund aims at developing professional management and financial sustainability of Microfinance Institutions. The purpose of the credit fund is to provide sustainable refinancing access to MFIs in form of external lines of credit and enable MFIs access liquidity to invest and obtain earnings. The managing institutions of the capacity building fund are AMIR and CAPMER whereas the managing institution of the credit fund is BRD. BRD had already identified the refinancing and the capacity building of MFIs as the main pillars in the development of the Microfinance industry. That is why it created a microfinance program according to the decision of its Board meeting held on July 9th 2002.

  3. “To become the Government of Rwanda’s investment arm by financing the nation’s development objectives with a focus on the priority sectors of the economy.” BRD MFI REFINANCING BRD Vision, Mission and Strategic Priorities “To be the most profitable bank at the service of poverty in financing priority sectors of the Rwandan Economy”. Vision Mission Strategic Priorities • Mobilize financial resources to drive Rwanda’s development • Develop special financing programs for key export sectors • Expand BRD’s product portfolio to meet customers needs • Engage and support key customers and partners • Promote Microfinance Services • Increase BRD’s effectiveness through reconfiguration and training

  4. BRD Agriculture FinancingBRD New and Old Products LOANS EQUITY LEASING TRADE FINANCE AGENCYFUNCTIONS MICROFINANCE GUARANTEEFUND ADVISORYSERVICES DEPOSITMOBILISATION

  5. BRD MFI REFINANCINGBRD Lending Conditions A detailed feasibility study or business plan for the project Proven technical capacity in the field of the project   Demonstrated capacity to manage the project GENERAL CONDITIONS Adequate market share   30-50% participation by promoter of investment (15% for cooperatives) Guarantee to secure the loan Interest rate of 10-16%. FINANCIAL CONDITIONS Repayment period: Varies and can be up to 10 years

  6. BRD MFI REFINANCING BRD General Lending Conditions Project financed Mortgages with title deeds Pledge of receivables or resources The joint guarantee of spouse or any other partner Guarantees Guarantee fund Accidents and fire insurance, etc.. Solidarity guarantee / caution solidaire

  7. BRD MFI REFINANCINGBRD Experience Financing - Figures Total BRD Portfolio amount to RWF 31.8 Billion . RWF 29.6 Billion are in DDI and RWF 2.3 Billion are in FOREDEM

  8. BRD MFI RefinancingBRD Experience in MFI Refinancing

  9. BRD MFI REFINANCINGIssues for MFI refinancing • No BNR license of the MFIs • No legal status of the MFI • Weak management of the MFI • Weak performance of the MFI • Lack of guarantees • Insufficient profitability of the business • Insufficient experience of the MFI • High level of leverage and be classified as a bad debtor in banking sector

  10. BRD MFI REFINANCINGIssues for MFI refinancing • Lack of transparent norms and performance indicators, • Lack of transparent pricing policy of products and services; • Poor governance of MFIs; • High rates of non-performing loans for the MFIs; • Lack of sufficient equity; • low level of MFI’s deposits; • Week Management Information and internal control Systems.

  11. BRD MFI RefinancingBRD Initiatives in Addressing Issues Hampering the MFI Refinancing • Guarantee funds that provide partial guarantees (SME Guarantee fund, SMGF, FAGACE) • Capacity building and Technical assistance trough BRD Advisory Services • Partnership with Microfinance stakeholders • Updated Criteria and Conditions of refinancing

  12. BRD MFI RefinancingBRD Criteria and Conditions for the MFI Refinancing • NPL less than 10% • BNR Reporting requirements, • BNR Governance Standards, • The amount of credit to be given by BRD should not exceed 20% of the MFI total deposits, • 80% of the MFI loan portfolio should be in productive sectors and MFIs should be present in rural area, • No additional guarantees will be required apart from MFI’s assets, • BRD will refinance MFIs at 6% and MFIs will finance their clients at reasonable interest rate, agreed on with BRD. • NB: Microfinance Banks are excluded from eligible MFIs to be refinanced, they have access to other resources,

  13. BRD MFI RefinancingDocuments to presents when requesting refinancing • Application letter • BNR License • BNR’s report for 3 quarters • Legal Status ( Ubuzima gatozi) • Business Plan for 5 years, • Audited Financial statements for 3 years, • Portfolio and loan aging reports, • Credit Policy, • Memorandum and articles of association( statuts)

  14. THANK YOU !! QUESTIONS, COMMENTS ?

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