Clients of micro-finance institutions in Rwanda are worried about high interest rates charged on loans which they say is a major cause for collapsing businesses.
Unlike traditional banks which charge not more than 18% interest on loans, microfinance institutions charge as high as up to 30% interest.
Kanyamasoro Muhire picked a small loan from Letshego Microfinance to start a business but says paying back the loan has been very difficult.
“Microfinance institutions charge about 30% interest on loans compared to 18% in banks. We work hard to pay back and avoid the list of defaulters,” he said.
Muhire thinks clients need to have dialogue with microfinance institutions to reduce the interest rates charged on loans.
Rwema Peter head of the umbrella organisation of microfinance institutions in Rwanda (AMIR) says micro finance institutions also borrow money from banks and pay back with a 18% interest.
“As microfinance institutions we also charge interest on this money when we lend it to clients. It’s the same money we use to follow-up on clients progress with their businesses and ensuring they pay back loans,” Rwema told KT Press.
In 2007 when microfinance institutions established AMIR their umbrella organisation, they were only 32 founding members.
Rwema says AMIR membership currently represents more than 90% of the microfinance sector in Rwanda.