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Transparent Pricing In Rwanda
Please note that MFTransparency is no longer collecting new pricing data. The data displayed for this country is for historical purposes only and does not represent current products or prices in the country. Note that the age of the information for each MFI is indicated in the table below.
The Transparent Pricing Initiative in Rwanda has published standardized pricing data from 14 microfinance providers, representing an estimated 90% of Rwanda’s microloan borrowers. Launched in 2011 the Initiative is delivered in partnership with Planet Rating and AMIR (Association of Microfinance Institutions in Rwanda), and is funded by the MasterCard Foundation.
Microfinance in Rwanda
The formal Rwandan financial sector has a low penetration ratio and informal financing activities are popular, such as the small self-help peasant organizations (tontines and ibimina) used for agriculture, cattle breeding and the purchase of domestic equipments. The support of microfinance by the government of Rwanda and the international donor and relief community after the 1990s conflict has been a critical factor in the creation of access to finance for Rwanda’s population. The microfinance sector has achieved a speedy growth in terms of outreach and volume of gross loan portfolio, and is now addressing the challenges of a poor loan repayment culture among borrowers, issues of financial sustainability and consumer practices to promote responsible lending.
Truth-in-Lending Legislation
The Banking Law No. 08/99 enacted in 1999 established the regulatory and supervisory environment of the Rwandan microfinance market by entrusting in the Bank of Rwanda supervisory responsibility of the microfinance industry. Additional specific regulatory directives and guidelines were issued to govern the activities of microfinance institutions, cooperatives, and savings and credit cooperatives (SACCOs).
The Rwandan House of Parliament passed the Consumer Protection and Competition act in 2011. Due to the highly competitive nature of the Rwandan microfinance industry, this law is expected to play a pivotal role in protecting poor households and in increasing awareness about consumer rights.
Rwanda Price Graph
The price graph presented below shows the prices of all the microloan products in the Rwanda dataset. Each data-point represents a real loan given to a real borrower, calculated using original loan documentation from the institution. The size of the data-point correlates with the number of borrowers that have a loan of that product at that loan amount. The color of the data-point correlates with the Transparency Index of the sample. The interactive legend beneath the graph can be used to change the graph axis and labels. Try the custom feature to see price correlations with attributes such as loan purpose, institution type, loan term and percent of gross national income.
The pricing dataset draws microloan data from a range of institution types; the majority of whom are cooperatives and non-bank financial institutions. A large proportion of the products analysed are designed for income generation purposes. The pricing data reveals a curve in the market average APR, showing that loans of a smaller size rise dramatically in price. The data indicates a strong correlation of loan products with lower prices being advertised with a more transparent price.
Individual lending is the favoured lending methodology employed by the Rwandan microfinance market, followed by solidarity group lending. Interest rates are quoted using both flat and declining balance calculation methods, with declining balance just slightly more common. The vast majority of microloan products were packaged with additional fees, insurance and other charges.
In this graph, the y-axis indicates the “Full APR”, defined by MFTransparency as the price including interest and all required fees, insurance, taxes and security deposits. This full price is then annualized with a nominal compounding procedure. For additional price calculations, please click on the institution name in the table below.
