A new loan scheme in Rwanda is helping women farmers escape the poverty trap. The loan giving Scheme that known as Babacoop operates just like a bank and is legally registered by the Rwandan government. Mostof the loans that it has provided since its inception have been for purchasing solar equipment, mostly panels.
Since its inception in 2014 to date, over 501 families, mostly single parent families headed by women have received loans to purchase over 900 solar panels either for domestic or business use. According to Ruth Rwagiira the chairlady of Babacoop, there are over 900 members of the scheme.
“We have over 5,000 members and they are all women. We hope to get full accreditation from the Central Bank of Rwanda to become a fully pledged bank by 2018. We sustain our incomes at the moment by giving loans to our members. In return, we earn eight percent interest on repayed loans and I can proudly say that the repayment rate is 99.1 percent.
“We give loans on ideas or pitches based on economic sustainability, or for home development up to three times a person’s savings. There is no collateral needed, we just deduct from your savings but incase of failure and accumulated amounts due to increasing interests due to late penalty payments, we go at a loss so as a result we end up risking and that is part of any business”, says Rwagiira during an interview in the organization offices.
She says that a big number of the members are urban women and some are employed and own farms in the rural area where the scheme is located.
“To reduce risks of default, we ask the employer of the applicant to co-sign. They do that in the presence of a lawyer. So in case of default, the employer takes responsibility for all payments. That has helped alot in repayments. Alot of the women are widows who lost their husbands to HIV/AIDS and giving them a chance for a new lease of life is the best alternative”, Rwagiira added.
There are several other schemes in accross Rwanda and they are giving banks a run for their money. According to the Central Bank of Rwanda records, there are over 300 such schemes known as cooperatives or SACCOS. They have given loans up to $79.78 million to people who would not otherwise been given by a bank.
“Most loans from the SACCOS have gone toward agriculture, especially green agriculture initiatives or any initiative that is is environmentally sustainable. Rwanda is coming of age especially in solar use and poo power in electricity generation. Rwanda ranks second in East Africa after Kenya in the use green energy such as solar running electricity in restaurants and hotels”, says Mwadiga Kirere a market researcher with Kirere consultants in Kigali in a separate interview in the capital.
He says that incase of a default, the SACCOs communicate with one another, so that the individual can be blacklisted from borrowing. They have a credit references Bureau that even gets to the mainstream banks.
“Its good to payback a debt, incase of future financial difficulties, you can always be given another opportunity to borrow. A good credit record is vital for your survival or downfall. Such an action has made defaults reduce drastically, I can confidently tell you”, adds Kirere.
After just 21 years of a bloody civil war where almost one million people were slaughtered mostly by machetes, most of them their heads cut off, Rwanda is doing fairly well economically.
“If you want to increase your chances of getting a loan by most economic institutions, write a good proposal focusing on green economy initiatives and I have to say that they are competitive”, says Alice Mureke in Kigali, Secretary General of Aslahi savings Scheme located in Huya, in the south. The scheme has 2,021 members mostly women with $88,987 worth of savings.
The case of Rwanda is also influencing other regional countries come up with suinitiatives. The plan is working out well.
“The chances of us giving you a loan are high compared with commercial banks. Even if you have a weak credit record, all you have to do is to get someone sign for you incase you default. Its the idea that you will sell, period”, adds Ms Mureke.
The world Bank estimates that by December this year, solar use and other renewables in Rwanda will go up by 34 percent as the credit unions continue to booster success in loans and savings.
“We do expect good growth rates of 34 percent by December if the current statistics of credit unions are anything to go by. More people are shunning comercial banks. This is because interest rates on loans are averagely six percent higher than that of credit unions. They are also deemed to be less customer friendly”, explains Professor Germano Mwabu, an economist and Africa’s consultant with the World Bank during a telephone interview.