Financial inclusion in Rwanda historically has been a barrier to economic development. Therefore, the Government of Rwanda established Umurenge Savings and Credit Cooperatives (U-SACCOs) in 2009 as part of a National Savings Mobilization Strategy. This strategy sought to mobilize savings and provide loans to rural Rwandans by creating at least one U-SACCO in each of the country’s 416 Umurenges, or sectors.

The government’s strategy was successful, as U-SACCOs began offering financial services across Rwanda. But the U-SACCOs weren’t automated, as each had individual procedures and business plans in different languages, making cooperation between the institutions impossible. Under the World Council of Credit Unions’ MicroLead Rwanda Program, funded by the United Nations Capital Development Fund, World Council sought to strengthen the U-SACCOs’ capacity and sustainability by merging 90 U-SACCOs into 30 district U-SACCOs, streamlining their procedures.

Through research carried out with its partner U-SACCOs, World Council learned to its surprise that 33,176 savings groups existed within these institutions. The savings groups represented the fastest-growing membership segment and fastest-growing segment of
borrowers within the 90 U-SACCOs.

These savings groups are a critical tool for Rwanda’s rural poor, particularly women. The informal groups are an entry point on the path to financial inclusion that allow members to build their financial assets and skills by slowly creating a savings base rather than accumulating debt through loans.

With a savings base, these groups then link with U-SACCOs, as the formal financial institutions offer secured savings and larger loans with flexible payment terms and lower interest rates.

While the groups comprised only 7.4% of total membership, they held 31.4% of total savings. Members used these funds to invest in the well-being of
their families and communities, including investments in health, housing, and small businesses.

Given the predominant role of the savings groups in the U-SACCOs and their role in supporting the extremely vulnerable, World Council used this research to ensure any modifications to the U-SACCOs’ internal mechanisms and financial products would benefit the savings groups as well, amplifying the positive impact.

World Council worked with the U-SACCOs to simplify account-opening procedures for savings groups, established procedures for group loan applications, and developed longer-term deposits. The latter allows savings groups with substantial savings or those with long-term deposits the opportunity to earn higher interest rates.

World Council also helped the U-SACCOs create products to meet the needs of the savings groups—providing much-needed agricultural, business, social, and educational loans, as well as an annual health insurance coverage loan for $200. World Council led the process in expanding the U-SACCOs’ number of working days to accommodate meetings with savings groups and trained U-SACCO staff and board members on financial literacy so they in turn could train savings groups. Together, the savings groups and streamlined U-SACCOs offer an avenue out of poverty for Rwanda’s rural poor.

CARA BIDWELL is program officer for World Council.