Human capital management in rwanda: challenges and prospects for microfinance institutions

2.3.5. Microfinance in Rwanda 2.3.5.1. Genesis

The microfinance sector in Rwanda is relatively young. Although small self-help peasant organizations (such as tontines and ibimina) have existed for some time, the sector formalization process started with the creation of the first Banque Populaire in 1975. The rate of bank utilization at the national level is still low, with only around 10% of the population owning an account with a formal financial institution in June 2006. On the other hand, MFIs including Banques Populaires, have created a large network. By June 2006, 93% of all branches opened by the credit institutions in the country were MFIs (rather than commercial banks) and these served more than one million customers. It is clear, therefore, that MFIs have a very significant role to play in enabling the majority (The Republic of Rwanda, 2007).

2.3.5.2.. Rwandan Microfinance Today: SWOT Analysis

The Government of Rwanda fully recognizes the role that the microfinance sector plays in providing financial intermediation most especially to low income earners. This is a critical tool to the attainment of the goals of Government's Vision 2020 program, which consists of transforming Rwanda from a low-income into a medium-income country with a dynamic, diversified, integrated and competitive economy (The Republic of Rwanda, 2007).

She maintains that the microfinance sector will strengthen the role of the private sector in the development of the country through increasing and diversifying investment opportunities. The microfinance sector shall help build a solid business community of entrepreneurs, focused on industrial and service sectors, including the financial, tourism and Information Communication Technologies (ICT) sectors. It will thus help to generate employment and to diversify sources of income in rural areas, thereby contributing to the improvement of the Rwandan economy and the sustainable reduction of poverty (Republic of Rwanda, 2007).

Niyonsenga and Zaninka (2007) observe that though the Rwandan Microfinance sector has experienced rapid growth in the last few years and has made significant contribution towards poverty alleviation in the country; the sector has recently experienced some difficulties with some institutions experiencing high defaults. The collapse of one of the biggest COOPEC and the closure of some MFIs and COOPECs by the Central Bank in June 2006 has led to erosion of confidence on the part of unprotected depositors and the general public. If unchecked, this may have adverse effects on the financial sector in general. The sustainability is still a big problem in this sector and different strategies should be developed

The study of Mayele, 2006, was rather more specific. According to him, the SWOT Analysis of the Rwandan Microfinance was as follows:

Strengths include the fact that traditionally Rwandans used to practice some informal microfinance, so using the same scheme in a more formal way faces little resistance. In the same line of argument, microfinance responds to needs of many rural people who have been ignored by the formal banking sector because they cannot afford heavy collaterals required. Especially, microfinance was already there provided by the Banque Populaire. However, the aftermath of the

1994 genocide highlights a need to assist the poor with micro credits so that they can be more and more self reliant.

Weaknesses included the fact that microfinance was not a domain of professionalism by many practitioners. This was supported by the findings of Kagishiro (2007) where he attacked lack of professionalism as a major reason as to why many microfinance institutions had closed doors. More to that, there is lack of business mindset whereby there was no clear distinction between business and owners.

Opportunities were highlighted as well. The Rwanda Microfinance policy was looked at as one of mechanisms to streamline the operations in the sector, thus more chances to instill confidence among clients. It was going to be really supportive. The projected microfinance forum was going to be an opportunity whereby institutions were going to enjoy capacity building and advocacy by the Association de Microfinance.

Threats were talked about. For example, the new policy was somehow criminalizing informal microfinance (Mayele, 2006), indeed, it was going to take some time to restore hope among microfinance clients, (Justin, 2007).

It has been observed in the Skills Audit Report that one of the needy sectors is finance (The Republic of Rwanda, 2009). Indeed, the main challenge of the Rwandan financial sector is inadequate institutional, organizational, and human resources capacity.. This poses a formidable challenge to the objective of Rwanda becoming a regional financial hub. This is because, «No nation becomes great when majority of her nationals are mainly idle, semi-skilled or out rightly unskilled». ( http://allafrica.com/stories/200711270316.html).

In one of articles written by Saul, he observes that according to the recent report by the National Bank of Rwanda (NBR), the banking sector is facing a serious problem of unprofessionalism. This observation was shared by Banque Populaire du Rwanda's (BPR), CEO, Ben Kalkman, who thought that the sector indeed lacked trained professionals. ( http://allafrica.com/stories/200912220038.html).

One of strategies is to hire best performing students from some of Rwanda's universities, to reduce the big number of un-professionals in the financial sector. http://allafrica.com/stories/200912220038.html).

Banks are experiencing the shortage of professionals, yet they are dominating players in the financial sector of Rwanda. After all they can give attractive salaries and other benefits. What can we expect of Microfinance Institutions? This is why it is interesting to carry out such a research to see the image of human capital management in that sector.