Informal Financial Institutions: A sustainable strategy for rural development in Rwanda. Case of Savings and Credit Associations in Rwamagana District 2011-2013

Abstract

This study studies the potential of Informal financial Institutions to stimulate rural development through savings and credit associations. Savings and Credit Associations are a form of informal financial institutions with a number of socio-economic functions. The functions include among others mobilization of communities to save and/ or invest their resources into income generating initiatives and provide credit. This research targeted members of Saving and Credit Associations and sector local leaders. Whilst the qualitative approach is the dominant in this research, the method used is a combination of quantitative and qualitative research, namely triangulation technique The findings reveal that members pool finances which are used to support the fulfilment of basic needs at the household level and at the community level, in addition to building up assets, agricultural development, income generation, social capital is both inherent to and stimulated by membership of the associations. Other findings also show that these associations warrant appraisal beyond the immediate financial opportunities they generate, because of their production and reproduction of values such as empowerment, reciprocity, and solidarity, and thus their significant contribution to rural development. For particular limitations, the study reveals that SCRA cannot provide bigger loans to members who need them for business, limited skills in financial education and high interest rate though the loan is provided without guarantee. On the basis of the results the study recommends that; 1) More education programmes on finance and business planning should be intensified in the rural areas. 2) Provide a focused and timely agricultural technical assistance to enable members have sustainable agricultural production. 3) Financial linkages between informal financial institutions and formal financial linkages for bigger loans.