Article Type : Research Article
Authors : Harelimana JB and Mukarukaka B
Keywords : Financial inclusion; Umurenge SACCO; Rwanda
This study examines the impact of Umurenge
SACCOs to financial inclusion in Rwanda. Secondary data which are time series
were analyses with objectives to find out whether U-SACCO have impact to
financial inclusion with baseline to 3 dimensions of Quality, accessibility and
usage are dimensions of financial inclusion. This study used descriptive
analysis and both excel and STATA used in computing data. The finding of this
study demonstrated the positive impact of U-SACCOs to financial inclusion.
However, government should put more attention on quality of financial service
in SACCOs by automating of all SACCOs.
For past decades financial inclusion has been vital in
economic development and main foundation rising up all sectors globally.
According to global financial inclusion (2010), the goal of financial inclusion
is to ensure that every individual has access to quality, affordable financial
services and every country has increased priority and possibility of access to
finances worldwide. Financial inclusion attracted attention of the world and put
strategies as well as different government program to attract individual to
engage in formal financial services and ease access to finance, like setting up
different financial institution and microfinances nearer and mobilizing the
population to join formal financial systems. According to Triki and Faye
financial inclusion in Africa has been lagging behind compared to other
continent and Less than one adult out of four in Africa have access to an
account at a formal financial institution [1]. Number of policy maker and
investors started promoting financial inclusion both in Africa and globally,
establishment of financial institution, Microfinance and saving and Credit
cooperatives (SACCOs) have largely increased across Africa for better financial
inclusion. According to Allen & Sam, SACCO’S movement has been increasing
across Sub-Saharan African and it estimated to be serving 8.81% of population
in Sub-Sahara Africa and SACCOs manage to penetrate and reach out in rural
areas where some commercial bank doesn’t extend [2]. SACCO movement known
Umurenge SACCO in Rwanda was initiated by government in 2008 and according to
MINICOFIN (2009), initiative of Umurenge SACCOs was primarily to address the
issues of hindrance of development of financial sector and as well as financial
exclusion which was highly alarming and 416 U-SACCOs were established at each
administrative sector by mobilizing and collecting savings from community, both
Rwanda cooperative Agency and National Bank of Rwanda with mandate to
regulating SACCOs. According to RCA financial year 2018-2019. (Table 1)
demonstrates details on RCA regulating SACCO. According to FinScope 52% of
Rwanda adults population were living without any kind of financial product and
as well more 86% of Rwandan adult used no banking product, financial inclusion
was challenge in Rwanda for past years and not many financial institutions were
established, Most (97%) of “banked” adults in Rwanda had a product with Union
des Banques Populaires du Rwanda (UBPR) [3]. Impact of umurenge SACCOs have
attracted attention of different researchers and this study is an added
knowledge to previous studies, the main objective of find out the
impact of U-SACCOs financial inclusion in Rwanda by analyzing
accessibility, usage and quality of U-SACCOs
to Rwandan population.
The following structure of this paper is as follow:
review of the related literature of SACCOs and financial inclusion, historical
Development on U-SACCOs and financial institution in Rwanda.
The objective of researcher is to find out if U- SACCO contributed to financial inclusion in Rwanda and (Figure 1) demonstrate theoretical framework of impact of U-SACCO to financial inclusion.
Figure
1: Demonstrate
theoretical framework of impact of U-SACCO to financial inclusion.
Figure
2: Road map for main activities for U-SACCO establishment
since 2009 at adoption of U-SACCO. IFA (2014).
Figure 3: Trend of financial use in SACCO since 2008-2019.
Figure 4: Trend of account holder in U-SACCO since 2010-2018, source; authors’ computation.
Figure
5: Trend
of deposit, outstanding loans and portfolio at risk, Authors’ computation.
Overview of saving and
credit cooperatives in Rwanda
Saving and credit cooperatives in Rwanda were established on philosophy of mobilizing and collecting savings from community in 2010 by the end year, account holders were 471054 members with deposit of 632,2267,782 Frw and loan issued that year were 813,723,942 Frw. This demonstrates U-SACCO to be solid provision of financial service to Rwanda population by reaching out to all people including in remote areas where other financial institution couldn’t. According AFI, each U-SACCO is located in 5 KM radius of Rwandan population which eases access to formal financial services [4]. Umurenge SACCOs are cooperatives purposely for providing financial products to its members and U-SACCO in Rwanda are currently offers 3 main products; savings, loans and deposits and other financial services. 416 U-SACCOs are licensed by central Bank, SACCOs are regulated by two main government institutions. According to National cooperative policy (2018) clarify the responsibilities of Rwanda cooperative Agency over SACCOs to monitor the applicability and respect of Cooperative Principles, Laws and Regulations in SACCOs and for National Bank of Rwanda is responsible to supervise the life of the SACCOs including governance, operations and finance, liquidity, loan portfolio management, compliance aspect to ensure sustainability of SACCOs. (Figure 2) demonstrated the road map for establishment of U-SACCO. According to RCA (June 2019), Population in Rwanda estimated to be account holders in SACCO are 3,006,629 members. The (Figure 3), below demonstrates the increment of use of financial services since the start-up of U-SACCO was 2010. Unlike like other microfinances, U-SACCOs had increasing trend of financial services which implies both interested of provision of U-SACCOs’ product to Rwanda population and impact to financial inclusion.
Financial inclusion and
financial intuition in Rwanda
According to Sarma, financial inclusion is "a
procedure which guarantees that the financial services are easily accessible
and used in the formal financial framework by all individuals in an economy
and" [5]. Effective Financial inclusion system plays vital role in
allocating productive resources and efficiently use of finance in daily life
and this paper revealed three basic dimension of financial inclusion banking
penetration (BP), availability of the banking services (BS) and usage of the
banking system (BU). According to Getachew, parameter used to measure financial
inclusion are 3 three Accessibility of financial services making financial
services available, affordable and convenient to users within the nearest
possible point of services [6]. Usage of financial services; making customers
to use financial services frequently and regularly, referred to creating
knowledge, confidence on offered financial services and incentivize to use and
Quality of financial service; making financial services appropriate and
tailored to clients’ needs. Efficiency of financial institutions supports the
economic development and control the monetary value of the nation. According to
NBR annual report (2019) financial system under its mandate of Rwanda central
bank supervisor are made of banks, microfinance, savings and credit
cooperatives, non-deposit taking lending financial institutions, insurance
companies and intermediaries and pension schemes. Banking sector was composed
of 11 Commercial Banks, 1 Development Bank, 1 Cooperative Bank and 3 Microfinance
Banks. Microfinance sector was composed of 19 Limited Liability MFIs, 438
Savings and Credit Cooperatives (SACCOs) of which 416 are Umurenge SACCOs and
22 other SACCOs end June2019, MFIs had 3,779,860 clients of which 3,006,629 are
members of SACCOs and 54 % of adult population are financial including through
SACCOs.
Contribution of U-
SACCOs in financial inclusion
Umurenge SACCOs have attracted attention of different
researchers on impact and sustainability of SACCOs in Rwanda. According to Uzziel
recent study with objective of examine the extent at which UMURENGE SACCOs
contributed in achieving accessibility, affordability and uptake of financial
services in Rwanda and used secondary of financial reports data from 2015-2106
and as primary data, logistic regression analysis was used to analysis
contribution of UMURENGE SACCOs financial services to members’ socio-economic
welfare and study revealed that
U-SACCO contributed in achieving
financial inclusion, however urged on lesser members request for loan in
U-SACCO compared to the savings [7]. According to Bigirimana & Hongyi, the
purpose of this research was to analyze the role played by commercial banks on
financial inclusion in Rwanda and the research analyzed basing on three
dimensions of accessibility, penetration and usage of financial services in
Rwanda [8]. The study tackled on the impact of SACCO as U-SACCO reach out in
villages where commercial banks should not reach, it makes them have a high
percentage of account ownership in general. This study is back up with previous
studies which point out the distance from U-SACCOs is located in 5KM radius of
the Rwandan population. However, paper revealed challenge of U-SACCO are not
computerized which hinders more financial including of population due to lesser
ATMs. According to Finscope, Umurenge SACCO is more accessible compared to
locations of other financial institution average minutes to U-SACCO vary
national wide, Kigali city is with least average minutes to adult to SACCO of
28 minutes and 38 second while western Province with more average minutes to
U-SACCO of 49 minutes and 50 seconds. This research revealed that 57% of
Rwandan adult population trust saving with U-SACCOs. However this research
didn’t declare the usage of credit from U-SACCO as separate.
This study examined the impact of U-SACCOs to
financial inclusion in Rwanda. Study used secondary data collected from RCA
report from 2010- 2018, descriptive data analyzed employed with baseline of 3
dimensions financial; usage, accessibility and quality of U-SACCO and 5
variables selected. According to Getachew, Usage, accessibility and quality to
financial service are dimensions to financial inclusion. The (Table 2)
demonstrates observation of 8 and 9 which implies eight years (2011-2018) for
loan portfolio which is always declared to the following year of issuing loan
and nine years (2010-2018).Summary of statistics demonstrate the adult members
registered with mean of 5390040 people since and account holders decreased to
mean of 1805683 people 2010-2018.
Accessibility of
Umurenge SACCO from 2010-2018
(Figure 4)
below demonstrates trend of account holders in U-SACCO since 2010-2018.
Findings of this paper revealed that the Rwandan population keeps on increasing
in accessing financial services through U-SACCO. There is increment in account
holders since start-up of Umurenge SACCO, it signifies easy access financial
service through Umurenge SACCO. This findings is backed by recent studies,
according Bigirimana & Hongyi, U-SACCO reach out more Rwandan population
more especially in remote areas [8,9].
Usage and quality of
financial service from Umurenge SACCO
The (Figure 5) represents deposits of members of
U-SACCOs (2010-2018), outstanding loans issued to members of U-SACCO
(2010-2018) and portfolio at risk (2011-2018). The results demonstrates the average increasing of trend
of deposits but there was a decrease for one year 2015-2016 and then increase,
trend outstand loans in U-SACCO since 2010-2018 is increasing. The trends for
both deposit and outstanding loans imply positive usage of financial service
and as well population is happy for quality of financial service. However, the
trend portfolio at risk is increase which implicate the number of loans which
are being paid back is increase.
The purpose of this study was to find out the impact of the U-SACCO to financial inclusion in Rwanda. Finding revealed that Umurenge SACCOs have positive impact to financial inclusion in Rwanda. The access to financial service has increased since 2010, trend of account holders increased which implies population will keep on increasing in usage of formal financial services and deposits and outstanding loan which implies positive impact of U-SACCO. Umurenge SACCOs have enlarged the accessibity, usage and quality financial service. However, researcher can’t tell effect of unpaid loans (portfolio at risk) which keep on increasing in U-SACCO. This study recommends the following