Impact of COVID-19 to the microfinance sector in Rwanda

Rapid survey and assessment - May 2020

Since early this year, the world is under a traumatic moment caused by the Covid-19 pandemic. To control and contain the epidemic; Rwanda implemented a range of containment measures including border closure, suspension of domestic travel, cancellation of public gatherings, institutions teleworking, and closure of schools, places of worship and non-essential businesses. These measures worked well for Rwanda to contain the pandemic, as of 30 May 2020, Rwanda reported 370 cases of COVID-19 infection. However, these measures have negatively affected the livelihoods of many Rwandans, especially those who earn their living on a daily basis. Furthermore, the measures also considerably affected the Microfinance sector which serves the majority of the Micro, Small and Medium Enterprises (MSME and SMEs).

In a bid to understand the impact and challenges faced by the microfinance sector during the COVID-19 pandemic, Access to Finance Rwanda (AFR) in partnership with Association of Microfinance Rwanda (AMIR) conducted a rapid survey that aimed to assess the extent to which, microfinance banks (both national and international), as well as the SACCOs (both Umurenge and Non-Umurenge), have been affected by the Covid-19 lockdown.

Objective of the study

The study is expected to inform various stakeholders and policymakers on ways to provide support to the microfinance sector and for peer learning, so that they can continue their work, sustain their own business and extend financing to low-income households and microbusinesses. Post COVID-19, we anticipate that with well-designed interventions and support, the microfinance sector will re-bounce, normalise and build strong resilience to this kind of epidemic now and in the future.

Summary of the rapid survey

The need for an affordable refinancing/funding facility has been one of the main challenges from MFIs for over a decade in Rwanda. This had been amplified by the recent COVID-19 lockdown, where clients of the MFIs were withdrawing their savings to sustain their livelihoods and meeting fixed costs of their business with no revenue inflow.

This also led to clients, who are mostly MSME clients not meeting their loan repayment obligations to the MFIs (some are taking advantage of the situation too). Withdrawal of savings and non-payment of loan repayments has put a huge stress on the liquidity positions of the microfinance sector and on the morale of the management and staff of the sector.

95% of the microfinance banks and microfinance institutions reported emergency need for liquidity in the next three months.

Decreasing revenue, mounting losses, specialised capacity needs and supporting the clients in the changing environment are cited as the most important concerns among sector actors. The sector also expects the stakeholders to provide timely updates and keep the managers of the institutions engaged in the decisions and measures put forth to support the sector.

Click here for the full survey focus note