Credit Rotation Funds

MFIs and SACCOs in Eastern Africa struggling with COVID-19 pandemic– our approach to restrengthening the financial sector and microfinance customers with credit rotation funds 


Since beginning of 2020, the entire world is facing COVID-19. A pandemic that does not only threaten our health and lives, but that affects numerous aspects of our day-to-day life negatively. Economic activities have shrunk, and the financial vulnerability of people increased. 

This applies particularly to low-income earners like smallholder farmers, micro and small business enterprises, socially marginalized groups, and others who struggled with a challenging financial situation even before the pandemic. In a joint effort with our local partners in Burundi, Kenya and Tanzania, we at Sparkassenstiftung Eastern Africa attempt to adding our contribution to the plenty efforts of Governments, other institutions, and stakeholders around the globe to mitigate the negative consequences of the pandemic. One measure agreed on is to create a Credit Rotation Fund1. Our partners in these countries are RIM2 in Burundi, AMFI-K3 in Kenya and SCCULT (1992) Ltd.4 in Tanzania.The German Federal Ministry of Economic Cooperation and Development5 provides an amount to financially support the establishment of a Credit Rotation Fund within the Sparkassenstiftung Regional Project “Rural Development in Eastern Africa through Institution Strengthening of the Microfinance Sector”. 

The main objective of the CRF is to mitigate the negative impact of the economic downturn on both - the microfinance customers and the microfinance industry. COVID-19 led to a credit crunch, as savers withdrew deposits from MFIs/ SACCOs6, debtors failed repaying their loans in due time, and follow-up of defaulters turned out to be difficult as saving and loan groups stopped meeting on a regular basis, to name just some of the challenges MFIs have been facing in the past months. Consequently, MFIs/ SACCOs are reluctant to grant new loans, or even lack the liquidity to refinance loans in the first place. Due to the lack of access to finance, micro and small businesses had to reduce or even stop operations, lay off staff, etc.  


Being a financial instrument that is ultimately targeting the end customer, the CRF has to be distinguished from (rotating) emergency funds aiming at rescuing the MFIs as such, e.g. by bridging liquidity gaps to finance their operational costs or alike.  

To attain the highest impact possible with the CRF, customer loans will be disbursed to MFI/ SACCO customers on a rotating basis, hence the loans disbursed shall, once repaid, serve to finance new loans. Specific purposes of an end beneficiary loan may include, e.g., green finance, investments in new technologies/ innovations, employment creation, etc. That means, the minimum requirement is the loans being used for productive purposes. 

The CRF shall mainly facilitate economic activities of microfinance customers; however, a side effect is to strengthen our partners, the national MFI/SACCO apex bodies. In the first four years after the CRF disbursement, the partner organisations and Sparkassenstiftung Eastern Africa shall manage the fund jointly. Once the joint CRF management ends with the end of the 1st main project phase, our partners will fully take over the management and get fully transferred the CRF, as a valuable asset, to strengthen their equity basis. 

Sparkassenstiftung für internationale Kooperation e.V.
Regional office Rwanda:
RICEM Premises, KN 193 St, Kabusunzu, Nyakabanda
P.O. Box 4335, Kigali-Rwanda

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