Letter on microfinance project in Rwanda, by Elisabeth Nyffenegger

Dear Editor

I would like to comment on the article in the November issue of Field Exchange, concerning the microfinance project in Rwanda.

Those involved in such projects would do well to read the biography of Prof. Mohammad Younus, the founder of microcredit schemes and the Grameen bank. Professor Younus realised that the population of the slums of Bangladesh are mostly illiterate, and are unable to gain access to an ordinary bank because of an inability to fill in and read all the required documents. Furthermore, they don't even have a proper address to give to the bank. So I fail to see why the issue of education should have any bearing on the success or failure of micro-finance projects, like the one implemented in Rwanda. The system was designed for people without education.

Professor Younus also understood that one of the hurdles that the very poorest face, is that they lack any collateral, so that a requirement for 20% of the loan to be made from one's own savings doesn't make sense if one is trying to target the very poorest. They haven't got savings, or anything else, against which to raise cash.

In Younus's scheme, the group is not collectively responsible for repayment. The deal is that no further loans can be given to that group before the loan is repaid. This is fundamentally different to someone else having to put up the money in case of default.

Younus went out to visit the beneficiaries of the project with his students. They went all the way to the Chittagong hills, where there had been a low intensity guerrilla war going on ever since independence. He observed that the violence had actually diminished partly as a result of the loans, as the money gave people some hope for the future without recourse to violence. So I can't really see why the past violence of Rwanda should be an issue.

Professor Younus was severely criticised, in particular by western NGOs, for the interest rates he set at 20% per annum. Yet in the Rwandan project, the interest rate was set between 5- 10-% per month, which works out at between 60 and 120% per year!! This is not only illegal in the western world, it is plain outrageous!!! People may as well go to the moneylender, whom Younus had also identified as one of the reason why people can't escape their cycle of debt.

If the people of Rwanda don't trust NGOs, we should perhaps seek an understanding of this in terms of the recent history when hundreds of NGOs of all descriptions flooded Rwanda. The people of Rwanda may be illiterate and uneducated, but they are not incapable of learning lessons of mistrust from hard experience.

The non-repayment of loans may, in part, be linked to the tradition that can be found in many African societies; there is no such thing as a loan. However, a gift may be given to someone which can later be retrieved by the donor should he be in need of it. Perhaps an anthropologist would be useful to strengthen our understanding in this area. Alternatively, and perhaps more simply, a consultation with the scholars from the National University of Rwanda in Butare, who have plenty of knowledge, might furnish us with an improved understanding of local values and customs so that future micro-finance projects are more appropriately designed for the Rwandan context.

Yours Elisabeth Nyffenegger, Geneva Foundation

Email: gf@iprolink.ch

Visit the website of the National University of Rwanda, Butare at http://www.nur.ac.rw