SACCOs asked to reduce non-performing loans
Managers of Savings and credit co-operatives (SACCOs) have been advised to strengthen lending mechanisms to reduce on the rate of non-performing loans.
Director General of Rwanda Cooperatives Agency (RCA)The call was made by Damien Mugabo during a meeting with SACCOs in Eastern Region.
Mugabo expects that with this in mind, SACCOs could lower their non-performing loans (NPLs) to about 5%.
“SACCOs authorities have to change the way the way the offer loans. They have to make sure that the people who secure loans have the capacity and also evaluate their project and if things go well, then we can hopefully bring our NPL levels down”
The warning comes after SACCO NPLs in Eastern province is at 12 per cent when National bank of Rwanda (BNR) says it shouldn’t exceed 5 per cent.
Mugabo said that failure to pay back loans is a result of lending to customers whose projects are not valuable enough.
“This makes the borrower unable to pay back after the proposed project fails to yield leading to losses”.
Savings and Credit Cooperatives have recorded major success in Rwanda and significantly contributing to the national microfinance sector: In 2011, they recorded a 12.1% growth and contributed 37.6% of the financial sector total assets.