MFIs high interest rates scaring away borrowers

  Borrowers say the high interest rates on   loans in the microfinance Institutions-MFIs hinder access to credit, despite the common perception that the sector increases access to finance. Complains are; an interest rate that goes up to 22 percent on a loan is too high considering the type of businesses they   operate which at times take long for the owner to start enjoying profits. “You see when the MFIs add high interest it is hard for us to make profit  to pay  back  the  loan and also keep  surviving,”  said Damascene Nkurikiryayo, a  retail  shop  owner  in  Ndera  sector, Gasabo District. With the banks  requirements   not bale to accommodate  borrowers  for  small  loans, microfinance institutions…

Insurance needs more flexible products

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More players seem to join the insurance sector every day, a surprise for a sector that only enjoys a 2 percent penetration in the country. With four new players expected to set up shop in the country this year according to the National Bank of Rwanda (BNR), the stiff competition in the sector will require companies to avail innovative products to the consumers. As of now they are 11 insurance operators in the country all gunning to expand their consumer base while setting the trend as market leaders. With health insurance being mandatory by law, arrival of new products will align the difference between the firms as they all seek to expand their customer base…

Parliament passes revised National Budget

Parliament passes revised National Budget

The parliament   has approved the revised National budget for the fiscal year 2014/2015 that was tabled by finance Minister, Amb. Claver Gatete   last   month. The  budget  adjustment catered for an increase of  Rwf 6.4 billion pushing the  budget to Rwf 1759.6 billion from Rwf 1753.3  that  initially approved by parliament  in July 2014 to  further boost  implementation of  the outlined  projects under the country’s  second development strategy. “The approved financing adjustments will ensure implementation of the second Economic Development and Poverty Reduction Strategy (EDPRS2) stays on track,” a statement from the Ministry read in part. However, the   approval came with a slight adjustment that saw an increase of Rwf 2.7 billion from the earlier prosed…

Commerce, hospitality sector most financed sectors

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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…

Bad loans now threaten microfinance sector

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The rapid growth of savings and credit co-operative societies without matching capacity to manage loans is partly responsible for the increasing bad loans. Latest statists from to national bank of Rwanda registered an increase its bad   loans from 6.8 percent recorded in 2013 to 7 percent by end of December 2014. “The capacity of loan officers to analyze loan applications and also ensure the monitoring after disbursement is still low,” Jessica Massi, a financial consultant said. Moreover, the lack of knowledge on the side of borrowers also contributes yet another threat to reducing bad loans. “We are carrying out a scientific research on the causes of bad loans which is becoming a prime threat to…

Banking sector buoyant as net profit rise by 54 percent

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The banking sector remained   profitable in 2014 recording a net profit increasing by 54.3%, a positive outlook that   provides optimism for a better performance this year. The sector  that  dominates the   financial sector  is looked at to   boost  access to credit  by  private sector to  drive  economic growth needed to  push the  country  to  middle income   by 2020. Central Bank  statistics indicate that  the  sector’s  net profit  after tax for the industry rose to Rwf34.94 billion December 2014    up from   rwf22.64 billion  in the same period in 2013 while its Return on assets  (ROA) and return on equity (ROE) stood at 1.9% and 10.8% respectively. “From stability and robustness perspective, the sector is sound and…

Nyabihu: Rural banks urged to priorities loans to farmers

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Angela Mukaminani, the vice mayor for finance and economic development of Nyabihu district has called on rural banks to give priority to farmers in their loan allocations to assist small farmers acquire loans to invest in agriculture. She made the appeal on Feb, 17, in a meeting with farmers and financial institutions that operate in the district. She required banks and related financial institutions to grant more loans to agriculture-related sectors, saying the current credit supply for the countryside remains insufficient and that it is hard for farmers to access bank loans. She indicated that majority of farmers were located in the rural areas where rural banks operated, and as such there was the need…

Borrowers contributing to high interest rates – Experts

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The banking sector has been pinned by the public for its high rates that make it difficult for eligible borrowers to access credit thus crippling the increase of flow of credit to the private sector. According to John Rwangombwa, Governor of the National Bank of Rwanda says that most borrowers cannot bargain for lower rates when they approach banks for a credit something that   contributed to laxity   by banks to bring down the rates. “The culture of borrowers not bargaining with banks have contributed to inefficiencies observed in the banking sector as indicated by high interest rate spread,” Rwangombwa said Moreover, other   borrowers are not aware of the conditions attached to the loans they  are…

Rwanda’s trade Deficit continues to widen

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  The country’s  trade deficit  continued to worsen  in  2014  widening by  7.5 percent, despite a  positive outlook  the economy  registered in the  same  period under review, the Central Bank   has  indicated. The bank  through  its monetary policy and financial stability  statement  for February  2015, showed  the deficit expanding   to USD 1,799.54 million by end of December    last year up from 1,674.38 million 2013 driven by   increased import receipts. Accordingly, formal imports value increased to USD 2,399.3 million representing   6.8% while  volumes   increased by  3.7%, mainly driven by   consumer goods (+4.9%), while  energy and lubricants (+3.4%),   capital goods increased  by 3.0%, while  intermediary goods recorded (+2.9%). The  Central bank says that the  rise in import…

Pan-African banks are improving competition – IMF

The IMF Director General meeting President Paul Kagame on her recent visit to Rwanda

With  their  presence in around  36 countries and Rwanda  inclusive , the pan African Banks  have triggered access to  higher skills and expertise, access to capital especially for continental  trade projects as well as  diversification of resources. For example, the emergence of eco bank   in Rwanda   increasing innovation and use of technologies in the country’s financial sector such as continental electronic payments systems, upgrade of the local payment systems something that triggers a cash lite economy. “These banks are driving innovation, enhancing financial inclusion, and in some cases have contributed to lower costs,” a report by IMF stated A renewed impetus for regional integration, coupled with the success of mobile payments in Kenya was propitious…