Rwanda's central bank BNR will begin making refunds to depositors who lost their savings following the collapse of microfinance institutions a decade ago.

According to a BNR announcement last week, depositors will be refunded up to 75 per cent of their savings; those who had received 50 per cent during the first phase of refunds will get a 25 per cent top-up.

Many unbanked people joined MFIs in the mid-2000s, but some of them later collapsed due to gross mismanagement and huge non-performing portfolios.

While the impending reimbursement should be welcome news for thousands of depositors whose monies have since been trapped, some are unhappy with the proposed rate and the fact that they will be getting the refunds in a currency that has seen significant depreciation in the decade when the deposits were frozen.

The depositors argue that they were victims of MFI mismanagement and should not be penalised through forfeiture of their deposits, which amounts to double jeopardy.

In many markets including Rwanda, there are deposit guarantee funds to insure depositors in case the lender collapses.

According to Article 3 of the regulation, gazetted in May this year, the fund covers depositors to a maximum of Rwf500,000 ($616) per insured depositor, “in aggregate with all eligible deposits account held in the same rights or capacity including interests accrued until the date of declaration of liquidation date.”

By the time of going to press the Central Bank had not responded to questions about the rationale for refunding only 75 per cent. Philibert Afrika, a development economist and director of the Centre for Economic Governance and Leadership at the University of Kigali, says the law should be the arbiter in this case.

He said the rates of reimbursement differ in various markets, giving the example of the US, where refunds are capped at 70 per cent.

“If there is no regulation on the percentage that depositors are refunded, that would be a loophole,” he said.

In June 2006, at least eight microfinance institutions were closed; some of them had declared bankruptcy while others simply succumbed to mismanagement.

Mr Afrika dismissed the complaint of currency depreciation saying it is a risk all investors assume and what is called the foreign exchange risk. This is a financial risk of an investment value changing due to changes in currency exchange rates.

Depositors are also borrowers, and, according to Mr Africa, the claim would be valid even if they had borrowed in dollars.