Picture: © Jeremy Weate
LMDF added the Republic of Rwanda to its portfolio in 2021 and in 2022 disbursed a second tranche to the institution Umutanguha Finance Company Plc (UFC). UFC was established as a savings and credit cooperative in 2003, at the initiative of a group of widows. Umutanguha means “loyal friend”. Since its creation, the MFI has constantly developed. UFC currently counts over 6,000 clients and 11 branches, located throughout Rwanda, with a strong predominance in rural areas (96.1% of its customers). 57.4% of the institution’s clients are women and the average disbursed loan is of EUR 1,372.
In Rwanda, poverty levels are persistently high, despite the improvements post genocide. Between 2016 and 2017, 55% of the population was living below the poverty line of $1.90 a day. Multi-dimensional poverty affects over half of the population. Unfortunately, the COVID-19 crisis did not help. The combination of poorer nutrition, limited health services, learning losses from school closures, and the likelihood that some children (particularly adolescent girls and children from poor households) may never return to school because of the COVID-19 has the potential to threaten decades of progress in human capital development.1 Agriculture continues to be the key employer for 80% of the population, however, the dense population and poor farming practices mean that sustainability is a concern. Food insecurity is highly prevalent with nearly one in five households suffering from insecurity and 35% of children malnourished.
Rwanda is a country that has been severely affected by the 1994 genocide, although clearly vast progress has been made towards recovery. The country is Africa’s most densely populated country, with continuing high population growth rates. Between 200,000 and 250,000 Rwandans enter the work force each year, and unemployment and underemployment are persistent challenges with 2 million people lacking jobs which adequately supported them in 2018. There are approximately 150k refugees in Rwanda, escaping both the DRC and Burundi. Good rights are provided to these communities, although instability in bordering countries has ramifications for Rwanda. If we look at the situation of young people in Rwanda and despite significant progress to date, many challenges remain. The unemployment rate is around 21% for young people. 60% of those who are employed work in jobs generally defined as low-productivity, such as subsistence farming, retail trade, and construction. Rwanda is experiencing massive youth unemployment and insufficient access to quality jobs. (World Bank).
By using different innovative products such as youth business loans, group loans and agriculture loans, UFC is driving financial inclusion for the vulnerable borrower groups in the rural areas of Rwanda. Some of the MFI’s borrowers in rural areas have started productive projects such as poultry keeping, crop husbandry hence improving their household incomes.
