Commerce, hospitality sector most financed sectors
The commerce, restaurants and hotels were the most financed sectors in terms of access to credit by private sector from commercial banks in 2014.
According to Central bank statistics, out of the total new authorized loans form commercial banks, commerce, restaurants and hotels took 41.6% of the total loans, a proportion that indicates the growth within the services sector.
This saw total loans disbursed to private sector increasing by 38.2 percent to Rwf 652.9 billion in 2014 from Rwf 472.5 billion in the same period in 2013.
“There is an improvement on the side of Banks on financing businesses mainly in these areas and we will as Central Bank continue to support banks to extend credit to private sector,” said John Rwangombwa, governor of the central bank.
The construction sector that has seen an increase in its growth received 21.1 percent followed by manufacturing sector that got 11.1 percent of the total loans disbursed.
The recent efforts to boost to push for the growth of Small and Medium Enterprises -SMEs in commerce and restaurants and Hotels by government has, as experts say increase financing going to the three sectors.
Despite the increased in disbursements, the private sector recorded an increase in the number of loan applications rejected by financial institutions which rose to 9,308 loan applications in 2014 representing 3.9% of total applications against 5,940 recorded in 2013.
Rwf 652.9 billion were approved against Rwf 790.40 billion requested, the rate of rejection of 17.4% is against 13.2% and 8.8% recorded in 2013 and 2012 respectively.
According to Central bank Individual loan applications received highest rate of the total loans rejected in 2014 with 83.3% (7,749 loan applications) were from individuals, while companies recorded 1,559 loan applications were from companies.
“Among the key reasons for rejection were poor repayment capacity due to lack of project profitability, lack of collateral, outstanding loans in various banks and bad credit history,” said Rwangombwa
The central bank governor also explained that the private credit reference bureau continued to support commercial banks in improving their lending decisions through the provision of credit information.
The rejection in terms of sectors, according to experts resulted from the nature of risks involved in the sectors where mining recorded highest with 68%, agriculture, fisheries & livestock following with 58%.
While mortgage industry that recently saw innovative products from banks that attracted its growth recorded 25% of the total rejected loans, commercial & hotel 18%, service sector 15% and personal loans 12%.