MFIs must be innovative to avoid duplication: AMIR

Microfinance Focus June 7, 2011: The Association of Microfinance institutions- AMIR recently recommended that Microfinance Institutions (MFIs) in Rwanda must be innovative to avoid duplication of financial products if they were to promote financial inclusion for all.

AMIR said that the current MFIs’ rushing to rural areas to tap the unbanked poor would not be able to help them access financial services unless new products were crafted.

Rita Ngarambe, Executive Secretary AMIR said, “Many MFIs operating in towns open branches in rural areas and still use similar methods in providing services to the people. Because of this problem of MFIs using the same products, it is affecting them greatly especially with increasing Non Performing Loans, poor governance and operational risks.”

She further explained that lack of communication skills among MFIs affected the promotion and development of their products and catalyzed low turn up of clients as they cannot understand the services available in MFIs.

“Many microfinance institutions and banks design product information in a complex manner unfamiliar to rural poor,” she said.

However, Ngarambe noted that AMIR embarked on training MFIs on financial reporting, accountability and customer care as one way of helping them break through challenges hampering their rural performance.

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My comments!!!

In Nepal also, MFIs are rushing towards expanding their services with opening new branch offices in the same locations. Only duplication of clients is not a big issue. The major risk for microfinance institution is over-burdening of loan to the borrowers. I think MFIs should able to assess their customer to avoid their future risk. In addition to that financial literacy / education to the microfinance members are also necessary to protect the clients.

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