After Rwanda’s horrific genocide of 1994, microfinance seemed to be an answer for the poverty-stricken country. The sector grew rapidly, which also laid it open to corruption and mismanagement. Rwanda has done all it can to polish up its image.

[Read the preceding article: Microfinance in Rwanda - booming after the genocide]

Faustin Zihiga is the boss of AMIR, a network of microfinance organisations. He greets us with a big smile when we meet him in his plain office, locating on a busy shopping street in the Rwandan capital, Kigali. He has been responsible for all microcredit in Rwanda since 2007.

"Straight after the genocide of 1994, I finished school," he says. "I did a training course on reconciliation. During the course, the same discussion kept coming back: how can we ever achieve reconciliation when we’re so poor? How do you achieve happiness? How can we live in peace? Every day bitter poverty awaits you at home!"
 
Microcredit seemed to be the answer. It could help Rwanda crawl out, unaided, from of the very deep abyss in which it had fallen.

Rice and corn
Rwanda’s experience with microfinance doesn’t go back as far as in many other countries. Most organisations operating in this field in Rwanda began less than ten years ago. An estimated 80 percent of this kind of finance goes to small enterprises. Farmers and farmers’ cooperatives can also borrow money to grow crops like rice and corn.

However, the sudden influx of money which microfinance brought caused problems. In 2006 bad management and a corruption scandal did a lot of damage. "Dozens of people have been arrested in recent years," Mr Zihiga says. "For example, managers wrote cheques for friends and family."

Bankruptcy
Eight local microfinance organisations were closed in 2006 after going bankrupt. The people who provided the funds had invested around six billion Rwandan francs – worth more than eight million euros at that time – and they are still waiting to get their money back.

"We grew too fast. It was out of control," says Mr Zihiga. "You’re lending money to people who are close to one another, living in small communities. If one of them gets into difficulties or doesn’t play by the rules, the others see that. Maybe they’ll end up doing the same."

Understaffed
AMIR is doing its best to show the rest of the sector how it should be done, but that’s a hard task. The problems still haven’t been solved. Mr Zihiga: "There’s a lack of everything. We need accountants, bankers, IT staff, human resource managers, even management is understaffed!"

"Micro-finance institutions (MFIs) often have weak management. People don’t have the know-how they need and there is no training available," says Dutchman Frank Bakx. Mr Bakx lives in Kigali and gives training courses in Rwanda, on behalf of the micro-finance organisation Terrafina "Many Rwandans don’t know how to invest and simply don’t pay the money back."

Rwanda also has another great problem, the local ‘braindrain’ or loss of people with advanced education and skills. People who’ve gained experience in the microfinance sector are often headhunted by other financial institutions, which offer better pay. "We are financially weak, while the financial market as a whole is growing in Rwanda," says Mr Zihiga. "Bankers regularly steal our people. So it’s an ongoing problem."

Ignorance and hope
Rwanda is doing everything it can to restore its national image – badly damaged by its violent past. Supervision of the MFIs has been tightened. Nevertheless Mr Bakx thinks things could go wrong at any time. "I would prefer not to call it corruption. Rather ignorance and maybe nepotism."

Mr Zihiga is much more optimistic: "We are looking five years ahead and hope we’ll have got much further by then; that we’ll have more professionals."

Rwanda is, after all, still in the relative early stages of a recovery process, and, as Mr Zihiga says: "I have reason to hope at the moment."