The banking sector in Rwanda registered Rwf96.9 billion in the first half of 2023, an increase from Rwf74.7 billion in 2022, according to the National Bank of Rwanda (NBR).
In the same period of 2021, the sector recorded Rwf55.9 billion profit.
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This is highlighted in the annual report of the central bank of 2022-2023, released on October 30, which details the financial and macroeconomic performance of the country.
The banking sector composed of 15 institutions of commercial banks, microfinance banks, development banks, and cooperative banks, had total assets of Rwf6,485 billion in June 2023, representing 18.1 growth from Rwf5,492 billion in June 2022. According to the NBR, this was propelled by retained earnings and deposit growth.
On the other hand, banks maintained a Capital Adequacy Ratio (CAR) of 21.1 percent, exceeding the regulatory minimum of 15 percent. This is a comparison of the available capital that a bank has on hand to its risk-weighted assets.
The ratio determines whether a bank has enough funds to cover losses and remain solvent under difficult financial circumstances.
Governor John Rwangombwa of NBR said financial institutions consistently maintained robust capital positions that exceeded regulatory requirements.
"This not only underscores their stability but also illustrates their capacity to withstand economic and financial shocks. The sector also maintained ample liquidity, with banks and microfinance institutions maintaining substantial buffers,” he said.
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When the central bank increased the key repo rate to curb inflation throughout the year until the current 7.5 percent, it also resulted in the increase of interbank rate, however, bankers reported to have incurred the cost and it hadn’t affected the clients yet.
Non-Performing Loans reduce
The stock of Non-Performing Loans (NPLs) in banks reduced to Rwf163.8 billion in June 2023 from Rwf166.1 billion in June 2022 mainly due to the continuous economic performance, and write-offs of some nonperforming loans that were long overdue, the report stated.
As a result, the NPLs ratio dropped to 3.6 percent in June 2023 from 4.3 percent in the same period of 2022.
This decline in the NPLs ratio is reflected across different sectors, except the manufacturing sector which recorded an increase in the NPLs ratio from 3.1 percent to 7.8 percent due to credit risks within a few large companies.
According to Rwangombwa, the improvement in NPLs portfolio was driven by continuous economic growth and prudent management of the loan portfolio.
Overall, the financial sector continued to perform well, with the total assets growing by 18.3 percent to Rwf9.6 trillion from Rwf8.1 trillion in June 2022, a growth buoyed by the banking sector.
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Assets of the pension sector, both public and private, increased by 16.2 percent, mainly driven by the growth in pension contributions and investment income, and the assets of the insurance sector grew by 17 percent, supported by retained earnings and capital injections.
Similarly, assets of the microfinance sector expanded by 26.5 percent driven by increased deposits and capital base.