Foreign banks are increasingly getting interested in investing in Rwanda mainly through joint venture partnerships.

In just a period of seven months, at least three local commercial banks have been bought by foreign financial institutions.

The latest is last week’s Access Bank Plc’s purchase of 75 per cent shares in Bancor Rwanda Bank.

But Bancor is not the only financial institution that has been recapitalised through a partnership. Partnering has helped the sector record an impressive 20 per cent real growth per year.

RABO Bank, a Netherlands-based financial institution—through its subsidiary, RABO Financial Investment Development (RFID), also acquired 35 per cent shares in Banques Populaire Du Rwanda in June.

This was just a month after Cogebanque had sold 40 per cent of its shares to Shorecap International, Africainvest and Belgium Investment Company (BIO).

While many other financial institutions are still expressing interest in the Rwandan market, the Development Bank of Rwanda (BRD) is now largely owned by the African Development Cooperation (ADChave dished out Frw4 billion in financing mortgages. The long term financing of housing—20 years at very attractive and affordable interest rate was introduced by BCR.

Hardly had Fina Bank settled in the country, Ecobank also bought the former Bank of Commerce, Development and Industry (BCDI).

This bank had been blacklisted by the central bank as an institution that was unprofessionally managed. National Bank of Rwanda bank inspection department discovered a lot of inside lending— which led the bank to collapse.

This was unprofessional way of running a bank, according to the central bank.

James Mosoni, the Minister of Finance and Economic Planning is happy foreign banks are investing in the country saying they have  provided experience, capital and good services required for the development of the finance sector.   

Opportunities
While some of these purchases seem to indicate that local banks like Banques Populaire Du Rwanda and Cogebanque have been seeking to meet the minimum capital required for a commercial bank, foreign banks are also keen at tapping the enormous opportunities in Rwanda and in the East African region.  

Robert Mathu, executive director Capital Market Advisory Council (CMAC) describes the Rwanda banking sector as having significant potential to grow.

"The level of banking penetration is significantly low,” Mathu said. 

At recent East African Investment Conference in Kigali, the director general of Rwanda Investment and Export Promotion Agency (Riepa), Francis Gatare urged investors to establish more commercial and agricultural banks in the rural areas.

Gatare’s call comes at a time government has come up with incentives to attract investors in the agriculture sector.

Despite its negative (-1.8 per cent) contribution to the Gross Domestic Product growth, government last year increased the agriculture sector budget by 50 per cent.

Through the BRD, government has created a guarantee fund for investors in the agriculture sector. The move is meant to reduce the risk of lending thereby building confidence of banks in the local investors in the agriculture sector.

Besides agriculture, Gatare also pointed out that there are numerous opportunities for bankers in leasing business, capital market and advisory services.

However the acquisition of Bancor, according to the new shareholders, is in line with Access Bank Plc’s African expansion strategy which commenced in March last year.

Herbert Wigwe, Group Deputy Managing Director, Access Bank said they will strengthen the existing customer base to provide quality services, support the retail service and move to electronic payment.

He said that they expect to use the Rwandan branch as an entry point into the East African region which has an estimated population of about 120 million people.

Whereas the big market is a boost for investing in the East African region, the macro economic variables in Rwanda play a vital role as a pool factor to investors in the finance sector.

The country’s inflation is now the lowest in the region at 8.9 per cent on annual average in the month of June.

According to the February 2008 monetary policy statement from the National Bank of Rwanda, the Rwandan Franc is said to have appreciation by 0.92 per cent compared to the US dollar in last year and the interest rates where stable at 16 per cent.

Clare Akamanzi, Deputy Director General of Riepa adds that the reforms in the financial sector have played a big role in attracting investors in the financial sector.

With these reforms, Akamazi says, the financial sector has become stronger and more solid for investors to invest their capital in Rwanda.

"The open regime allows investors to bring in and take out capital as they may wish,” Akamazi said.

Hannington Namara, BCR’s Head of Corporate Banking sees the entry of foreign banks as an opportunity to the Rwandan society.

He said it will bring a health competition in the sector and more services are likely to be introduced on the market.

The high levels of experience and expertise these banks provide have already helped to transform some of the local banks which were poorly managed and this is why foreign banks have turned out to be the leading drivers of change in the local finance sector.

Investors are exploiting the opportunity with which it is easy to start business in Rwanda. The operating environment is good. The security in the country makes it easy for CEOs (chief executive officers) and experts to operate in Rwanda, Mathu said.

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