1. MFIs REFINANCING October 2009 By : Christine KARANGWAYIRE BRD Director of Investments Department

2. 2 BRD MFIs Refinancing Introduction To support Microfinance sector, the GoV established the credit and the capacity building funds. The capacity building fund aims at developing professional management and financial sustainability of Microfinance Institutions. The purpose of the credit fund is to provide sustainable refinancing access to MFIs in form of external lines of credit and enable MFIs access liquidity to invest and obtain earnings. The managing institutions of the capacity building fund are AMIR and CAPMER whereas the managing institution of the credit fund is BRD. BRD had already identified the refinancing and the capacity building of MFIs as the main pillars in the development of the Microfinance industry. That is why it created a microfinance program according to the decision of its Board meeting held on July 9 th 2002.

3. 3 “To become the Government of Rwanda’s investment arm by financing the nation’s development objectives with a focus on the priority sectors of the economy.” Mobilize financial resources to drive Rwanda’s development Develop special financing programs for key export sectors Expand BRD’s product portfolio to meet customers needs Engage and support key customers and partners Promote Microfinance Services Increase BRD’s effectiveness through reconfiguration and training Mission Strategic Priorities Vision “To be the most profitable bank at the service of poverty in financing priority sectors of the Rwandan Economy”. BRD MFI REFINANCING BRD Vision, Mission and Strategic Priorities

4. 4 LOANS LEASING AGENCY FUNCTIONS GUARANTEE FUND EQUITY TRADE FINANCE MICROFINANCE ADVISORY SERVICES BRD Agriculture Financing BRD New and Old Products DEPOSIT MOBILISATION

5. 5 A detailed feasibility study or business plan for the project Proven technical capacity in the field of the project Proven technical capacity in the field of the project Demonstrated capacity to manage the project Adequate market share Adequate market share 30-50% participation by promoter of investment (15% for cooperatives) GENERAL CONDITIONS Guarantee to secure the loan Interest rate of 10-16%. Repayment period: Varies and can be up to 10 years FINANCIAL CONDITIONS BRD MFI REFINANCING BRD Lending Conditions

6. 6 Mortgages with title deeds Pledge of receivables or resources The joint guarantee of spouse or any other partner Guarantee fund Guarantees Accidents and fire insurance, etc.. Project financed Solidarity guarantee / caution solidaire BRD MFI REFINANCING BRD General Lending Conditions

7. 7 BRD MFI REFINANCING BRD Experience Financing - Figures Total BRD Portfolio amount to RWF 31.8 Billion. RWF 29.6 Billion are in DDI and RWF 2.3 Billion are in FOREDEM

8. 8 BRD MFI Refinancing BRD Experience in MFI Refinancing Activities Number of Projects Value of projects Comments Loans applications224 003 717 172 Loans approved10 1 600 000 000 Loan agreement in process for 2 MFIs Loans disbursed8 1 320 000 000 Loans rejected8 2 524 156 400 The reasons of rejection differ from the institutions to another. Portfolio as at 31 st August 09 8 796 493 030 87% are loan in class 1, 9% in class 2 and 4% in class 4, 3% are in arrears. Pipeline as at 30 th September 09 2 70 000 000

9. 9 No BNR license of the MFIs No legal status of the MFI Weak management of the MFI Weak performance of the MFI Lack of guarantees Insufficient profitability of the business Insufficient experience of the MFI High level of leverage and be classified as a bad debtor in banking sector BRD MFI REFINANCING Issues for MFI refinancing

10. 10 Lack of transparent norms and performance indicators, Lack of transparent pricing policy of products and services; Poor governance of MFIs; High rates of non-performing loans for the MFIs; Lack of sufficient equity; low level of MFI’s deposits; Week Management Information and internal control Systems. BRD MFI REFINANCING Issues for MFI refinancing

11. 11 BRD MFI Refinancing BRD Initiatives in Addressing Issues Hampering the MFI Refinancing Guarantee funds that provide partial guarantees (SME Guarantee fund, SMGF, FAGACE) Capacity building and Technical assistance trough BRD Advisory Services Partnership with Microfinance stakeholders Updated Criteria and Conditions of refinancing

12. 12 BRD MFI Refinancing BRD Criteria and Conditions for the MFI Refinancing NPL less than 10% BNR Reporting requirements, BNR Governance Standards, The amount of credit to be given by BRD should not exceed 20% of the MFI total deposits, 80% of the MFI loan portfolio should be in productive sectors and MFIs should be present in rural area, No additional guarantees will be required apart from MFI’s assets, BRD will refinance MFIs at 6% and MFIs will finance their clients at reasonable interest rate, agreed on with BRD. NB: Microfinance Banks are excluded from eligible MFIs to be refinanced, they have access to other resources,

13. 13 BRD MFI Refinancing Documents to presents when requesting refinancing Application letter BNR License BNR’s report for 3 quarters Legal Status ( Ubuzima gatozi) Business Plan for 5 years, Audited Financial statements for 3 years, Portfolio and loan aging reports, Credit Policy, Memorandum and articles of association( statuts)

14. 14 THANK YOU !! QUESTIONS, COMMENTS ?