The banking sector recorded marginal gains in the first quarter of the year, the National Bank of Rwanda (BNR) quarterly monetary policy and financial stability statement indicates. 

John Rwangombwa, the central bank governor, said banks’ profitability as indicated by the return on average equity (ROAE) and return on average assets grew to 14 and 2.6 per cent, respectively between January and March. This compares to 11.9 and 2.3 per cent, respectively recorded in March last year.

"It is commendable improvement and an indicator that the sector is heading in the right direction,” Rwangombwa said during the quarterly briefing at BNR head offices in Kigali on Tuesday. He however noted that at 14 per cent, the banks’ ROAE was lower than for other banks in the region.

There are 16 banks in Rwanda, 10 of which are commercial; four microfinance; one cooperative bank and one development bank.

The sector’s net profits grew to Rwf12 billion during the first quarter, up from Rwf8.8 billion last year, according to BNR.

Total assets rose from Rwf1.6 trillion in March last year to Rwf1.9 trillion this year, while total deposits increased slightly to Rwf1.3 trillion during the period from Rwf1 trillion last year.

The industry’s net loans went up from Rwf872.1 billion to Rwf1.1 trillion; capital adequacy ratio that measures banks’ capital to risk ratio, increased from 22.6 per cent to 25.9 per cent.

Maurice Toroitich, the managing director of KCB Bank Rwanda, attributed the growth to increasing efficiencies in the sector, leading a reduction in operational costs.

Sanjeev Anand, the managing director of I&M Bank Rwanda, said banks have embraced new technologies to reduce cost of doing business.

He dismissed claims that banks impose high interest rates to increase profitability.

Loan interest rates have averaged 17.5 per cent per annum during the past year, which clients say is high.

Anand, who is also the Rwanda Bankers Association chairman, noted that the cost of borrowing largely depends on the cost at which each bank accesses funds for on-lending to clients.

ben.gasore@newtimes.co.rw