Governance and Performance of Microfinance Institutions in Rwanda, A Case Study of Vision Finance Company S.A

ABSTRACT In 2003 Government of Rwanda established a number of micro finance institutions but many of them were closed down since 2006 to date. To find out the causes, a research study was carried out to ascertain the relationship of governance and the performance of microfinance institutions by applying the following objectives: Ascertain financial stability of micro finance institutions and the nature of products and services provided to their clients, establish how microfinance institutions select clients in loan applications, identify the internal controls and credit monitoring systems applied by microfinance institutions in loan recovery. In order to achieve the objectives the following research questions were formulated: Are the Microfinance Institutions financially stable? What are the products and services provided to their clients? How do Microfinance Institutions select clients in loan applications? What are the internal controls and credit monitoring systems applied by Microfinance Institutions in loan recovery? Researcher used primary and secondary data of descriptive in nature to study the nature, structure and operation of Microfinance Institutions. Self administered questionnaires were used to collect and present data for findings and conclusions. It has been observed that Microfinance Institutions are largely financed by interest income, borrowed funds, donations and grants. Clients are selected based on ability to repay, credibility and government recommendations. Microfinance Institutions have written manuals, and employs external and internal audits. Over the last three years governance and performance of microfinance institutions has greatly improved due to monitoring of national bank and its stringent requirements for establishment and operation of Microfinance Institutions. It has been recommended that Microfinance Institutions should invest more in treasury bonds and increase banking services to increase its deposits, while reducing dependency on borrowed funds, grants and donations. Researcher recommends for further research on life impact analysis of the poor.