Exploring how microfinance institutions can enable access to financial services in rural areas of Rwanda : a case study of Réseau Interdiocésain de Microfinance

Abstract: Most of rural based population in developing countries are poor and uneducated. Due to these conditions, rural communities do not attract traditional financial institutions. In response to the issue of financial exclusion, the existence of microfinance institutions has been embraced as a solution to avail financial services to rural communities. However, the solution presented by microfinance institutions has been debated and criticised by the scientific community for not fully respond to its potential and aspirations. In this regard, this study contributes to better understand of how microfinance institutions build financial relationships with rural communities to enable them access financial services. A marketing perspective was applied to investigate how a microfinance institution engage with rural communities to build profitable financial relations with these. This study was undertaken using case study research methods. It focuses on Réseau Interdiocésain de Microfinance as the company case and four semi structured interviews were conducted to get both the perspectives of Réseau Interdiocésain de Microfinance and rural communities. To identify and explain how relationships are built in this context, the bottom of the pyramid concept and social capital theory informed a theoretical framework. This framework guided data collection and analysis in this study. The analysis shows that microfinance institutions build financial relationships with rural communities by approaching sites where people gather in rural areas and where situations for building relationships can be favourable. The sites identified in this study include the church and cleaning works known as ‘umuganda’. These sites create situations where critical aspects for building relationships can be found. These aspects include trust, social norms and social networks that exists within the rural communities. This study concludes that Microfinance institutions can build financial relationships with rural communities by approaching sites where situations are favourable for building such relationships. This study therefore suggests that to enable access to financial services in rural communities, microfinance instutions have to identify and engage in sites where they can reach into rural communities and build relationship with them.