The recently commissioned Mara Phone factory in Kigali, which manufactures smartphones. PHOTO | RWANDA OFFICE OF THE PRESIDENT The reduction in interest rates is already impacting Rwanda’s banking sector, with some players already registering growth in their loan books, as the growing appetite for credit paints an optimistic picture for 2020.
The country’s central bank recently maintained its repo rate at five per cent, which ended up having an effect on interest rate reduction, but industry players have noted that it is the stiffening competition that is largely responsible for the reduction in interest rates.
The sectors interest rate now stands at 16 per cent from the previous 18 per cent and above, with some banks even able to go lower than that depending on the customer’s credit history.
Interbank interest rates fell from 5.64 per cent in 2018 to 5.45 per cent on average in the first half of 2019, according to the recent Central Bank monetary policy and financial stability statement, which made it possible for banks to afford a reduction in interest rates on loans to their customers.
Interbank activity almost doubled both in value — from Rwf225 billion, to Rwf493 billion. The bulk of deposits that cushioned Banks came from Non-financial corporations, which grew by 11.1 per cent.
AUTHORISED LOANS
Access to relatively cheaper loans this year led to an 8.2 per cent growth in loans to the private sector.
The industry also saw a reduction in rejected loans, standing at 12.1 per cent from 27.9 per cent in 2018.
“What is driving the decline in interest rates is competition. The repo rate is there but the key ingredient is competition, we have 11 banks operating in a small market,” said Diane Karusisi, the CEO of Bank of Kigali.
She said that the appetite for loans driven by the cheaper loan products offered by banks, is expected to spill into the new year, and that it will happen in tandem with the growth trajectory the economy is taking.
“The demand for loans is always big as the economy grows, next year we still see the demand for financing growing, we have seen inflation going up, we do not know how the Central Bank will respond,” Ms Karusisi said.Most banks recorded an increase in their loan books in the last quarter of the year, spelling increased activity in the private sector as the country continues to attract capital investments in different sectors of the […]
