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Rwanda > Vision Finance Company s.a. (VFC), a partner of World Vision International

Vision Finance Company (VFC) was founded by World Vision International’s program in Rwanda, World Vision Rwanda, in 1997. World Vision is a Christian humanitarian organization dedicated to working with children, families and their communities worldwide to reach their full potential by tackling the causes of poverty and injustice through the five arms of health, education, food, water, and economic enterprise. VFC functions as World Vision Rwanda’s chief economic enterprise development arm of this approach to rural and urban development.

History

VFC issued its first loans in 1997 and was the first international microfinance institution in Rwanda to roll out a voluntary savings program, and to institute individual and agricultural loans. It was a member of a consortium to introduce a Grameen Foundation “Village Phone” product. Initially, VFC provided loans through the group-methodology community banking model. VFC’s first clients were farmers within farmers’ associations and child headed households who had completed vocational training.

In 1999, VFC developed into a separate program of World Vision Rwanda called Amizero Microfinance. By 2004, VFC became a separate legal entity regulated by the Central Bank of Rwanda and wholly owned by World Vision Rwanda. Vision Finance doubled in the eighteen months between third quarter 2004 and first quarter 2006.

The road to growth has been a difficult one. One challenge has been personnel capacity. The same managers when the institution was 6,000 clients remained to manage 16,000 and then 23,000 (credit and savings) clients. Also, in step with increased clients, operations control (field audit) staff were not increased, and direct field supervision was not increased in due proportion. Another challenge has been instituting a functional MIS software. For seven years, Vision Finance relied on a manual paper-and-Excel based system for tracking clients, even when figures reached 16,000 clients. Not until September 2006 did the Organization begin reporting utilizing an automated system.

VFC, however, has much to be proud of. The new Managing Director and the management team implemented a strenuous sixtyfour (64)-point plan to control portfolio quality. By November 2007, portfolio past due over thirty days totaled 4.8% and portfolio-at-risk over thirty days equaled 5.6%. Vision Finance maintains solid homegrown policy manuals and World Vision-conscious senior managers. Senior management has taken emotional ownership of the institution; Vision Finance’s goal is to reach full professionalism as an institution over the next several years.

Rwanda Situation Analysis

Rwanda is emerging from the aftermath of the 1994 mass genocide during which roughly one million of its citizens were slaughtered in a period of only 100 days. The Rwandan genocide was one of the most brutal examples of ethnic extermination in modern times. Entire families were lost and tens of thousands of children were orphaned. The United Nations considers Rwanda among the twenty-one (21) nations in the world that categorically fall into the “Low Human Development” category in its 2007 Human Development Report. Rwanda, in the lowest category, ranked near the bottom at 161 out of 177 nations. Rwanda’s low ranking was the result of strikingly low life expectancy, adult literacy, primary and secondary school enrolment, GDP per capita, access to clean water, and underweight children. This said, within the next year, in 2008 Rwanda improved its ranking to 165 out of 177 nations.

Despite the genocide fourteen years ago and the low development in the country, Rwanda is a nation of hope. New roads have been constructed across the nation, new universities have opened, the economy has grown, and reconciliation is slowly progressing. Predominantly agrarian, the Rwandan population has limited access to commercial bank loans and services, lacking necessary collateral and being considered generally unbankable by formal banks. Microfinance institutions have begun filling the disparity between the demand for credit and savings and the supply of services. Commercial banks require high levels of collateral and salary. Since property rights are negligible, the rural poor are not able to access credit since their only asset of any worth are their small farms. Banks will not take farm land as collateral.

Many Rwandans desire access to credit to pull themselves up and work to provide for their families. VFC does not require collateral in order to access credit. VFC fills a critical gap in the financial sector enabling thousands of rural and urban poor to access working capital for their small start-up or existing businesses.

VFC Clients

VFC gives hope to the hard-working poor in Rwanda, and the dignity of a job and the opportunity to work their way to a better life for their children. By providing a small amount of loan capital and business expertise, VFC helps to release the full potential of these entrepreneurs. .

VFC operates primarily in deeply rural areas underserved by financial services providers. Over 75% of VFC clients are rural and the majority of all clients, 69%, are women, many widows.

Loan Products
Community Banking

VFC’s community banking product will constitutes a large part of the portfolio. Most clients are required to go through a cycle of community loans before they are permitted to apply for individual loans. Community banking loans provide the best combination of: rate of return, low risk, short length of loan, and deep benefit to poor clients. VFC will alter the length of repayment for community banking loans to range between four, six, and eight months. VFC’s average loan repayment schedule for all loans is currently eight months.

Solidarity Group

Solidarity groups range between 5 and 9 clients. The solidarity group has traditionally been a graduation from community banking, but VFC saw that they were more successful with clients. Solidarity borrowers were more satisfied in smaller groups, so this methodology is now applied even amongst clients who have not passed through a community loan. Also, solidarity lending is only done in urban areas, unlike community loans which are largely performed in rural communities.

Cooperative Loans

VFC has introduced lending directly to rural cooperatives for agricultural inputs that may be held as collateral. The maximum loan amount totals 2,000,000 FRW and ties together with World Vision Rwanda Area Development Programs (ADPs) and the World Vision Rwanda Development Assistance Program (DAP). Cooperative loans are only be available in World Vision Rwanda operating rural areas.

Agricultural Loans

Agricultural loans provide the most direct impact on the lives of the rural poor. However, the loans pose the greatest risk, while earning the lowest rate of return. In order to minimize VFC’s risk, agriculture clients are required to take part in compulsory savings— 10% of the loan amount. This fund serves as collateral in case of default, but also introduces personal savings to clients who have never had the opportunity to save their money. Agricultural loans pay interest only until the harvest season. Cash is therefore tied up in the field for as long as a year. VFC will reduce its exposure to agricultural loans between 2008-2010 while targeting agricultural inputs that may be funded as a business, not as a subsistence-survival enterprise. Agricultural loans are only available in deeply rural areas.

Individual Loans

Individual loans are market driven. Clients are more savvy and the interest rates are more subject to elasticity. Individual loans are provided to both voluntary savings clients and new clients. Individual loans are critical in order for voluntary savers to agree to place their money with VFC.

Village Phone Leasing

VFC currently issues specific loans earmarked for the purchase of the Grameen Foundation’s rural phone. In rural Rwandan areas that do not have access to electricity or to the mobile phone network, VFC deploys Village Phones. The Village Phone is not a traditional loan, but rather a lease. The phones come with a car battery in order to charge the phone, a large antenna to place in a tree or on a long pole, and an earpiece for clients to talk into. The rural entrepreneur places the phones inside her shop in her rural village, and fellow villagers come from all over the area to make calls. Enabling a village to have access to communication yields the following: reduced time transiting to use telecommunications in urban centers, an increase in rural income due to improved rural knowledge of agricultural commodity prices, and improved community well-being in the event of emergencies. Village Phone Leases will be provided in rural areas with no access either to electricity or a regular mobile phone network or both.

Coffee Bike Leasing

The Coffee Bike is a bike that has been engineered for hilly and mountainous regions. This is an advantage in navigating the hills of Rwanda. The Coffee Bike program allows clients to take out the Bike on lease from VFC. Over the course of the year, the client pays back monthly installments. This product is in high demand and is very low-risk, because if the client defaults, the bike can be re-collected as collateral.

Industries and regions to benefit from Coffee bicycle leasing:

Coffee: Gisenyi, Kibuye, Cyangugu (traditionally drastically underserved areas and badly affected by the genocide with a high proportion of genocide widows. High quality coffee comes from these regions.)

Potatoes: Ruhengeri (Potatoes are one of Rwanda's staple foods - this region accounts for the majority of the country’s production)

Dairy: Umutara, Bugesera (these regions, especially Umutara, are responsible for the majority of dairy production in the nation – dairy cooperatives will be targeted likely in coordination with a Land-O-Lakes - USAID project to target people living with HIV and Aids. The partnership will attempt to provide better nutrition to the victims, so that they can better resist disease and tolerate the ARV medication)

Bananas: Rwamagana, Ngoma, Kayonza, Kirehe

Cassava: Gitarama

Taxis: Umutara, Bugesera (these areas are flatter than other parts of Rwanda and are less populated, and therefore have fewer transportation options)

Solar Panel Leasing

Future plans:

VFC has hopes of introducing more innovative products to help serve the working poor in Rwanda and create a better community for all.

Solar Panel Leasing

VFC is has plans to partner with a niche player in the international market for carbon credits. The partner will make carbon credit funds available to VFC for each leasing product that reduces carbon emissions. VFC is working to include solar panel carbon credits (expected to total roughly US$40 per solar panel leased by VFC) and coffee bike carbon credits in the future.

Additional products potentially to be added for leasing include sewing machines and motorbikes.

Mobile Banking Partnership

In the future, VFC is planning to partner with one of Rwanda’s telecom providers to bring mobile banking to VFC clients. In theory, the partnership would allow clients to make repayments and money transfers using their mobile phone. Clients selling commodities could also see huge benefit as they would be able to get up-to-date market price information on their crops.

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