Rwandan millennials, born between 1981 and 1996, dominate the banking sector’s borrowing market, at 56.4 per cent, ahead of Gen X, born between 1965 and 1980, who are at 21.5 per cent, the latest credit data shows.

The youngest generation on the other hand, Gen Z, has a non-performing loans ratio of 7.0 per cent, as a result of a lack of financial education and a need to develop improved credit management skills.

The analysis by TransUnion Rwanda which maintains the Credit Reference Bureau further showed that mobile loans are more popular among Gen Z, born 1997-to date, making up 68.2 per cent of all their loans, compared to 56.3 per cent for millennials.

The data and analysis further show that the highest risk customers are the so-called silent generation (1926-1945), with an average NPL ratio of 9.0 per cent, as most are retired and have shrinking incomes that make it difficult for them to meet their credit obligations.

The trends, experts say, highlight the need for banks and the financial sector to review and reimagine their operations to the current circumstances if they are to stay on a growth path.

Samuel Tayengwa, Head of Product for TransUnion Rest of Africa Region said that the trends will require a greater focus on risk management and customer-centricity, with customer segmentation and data insights critical for decision-makers to make more informed judgments.

"We’re going to see a greater emphasis on driving strategic value through data, which can be used to make more accurate predictions to inform strategic decisions like increasing wallet share, identifying cross-sell opportunities and prevention of customer churn,” he said.

The findings come at a time when the Central Bank’s Financial Stability Committee noted that while Non-performing Loans had dropped to 5.1 per cent as of September 2021 compared to 5.7 per cent in June 2021.

However, despite the drop in loans, the Central Bank noted that risks persists as loans under watch category (whose payment is late by 30 to 90 days) increased by 70 per cent to Rwf 476B as of September this year. This represents 14 per cent of total loans.

Peace Uwase, the Director-General of the Financial Stability at the Central Bank said that the sectors with most loans on watch category include Commercial Real estate, manufacturing and hotels.

"The uncertainty surrounding the performance of those sectors, such as hotels as a result of the pandemic and containment measures. Some of these loans had been restructured, have been under moratorium and have not resumed payment hence being categorized under watch category,” she explained.

The Transunion report showed a decline of 48.2 per cent in new loans opened as of third quarter of 2021with 102,987 new accounts opened in Q3 2021, compared to 198,862 new accounts in the same period last year.

Tayengwa said the pandemic had also sparked a greater focus on customer financial wellness, with lending institutions becoming more active in helping their customers achieve lasting financial well-being.

"We will also see a greater drive towards digitalisation in Rwanda’s banks, with consumer appetite for seamless, friction-right online transactions likely to grow due to increased competition between lenders, pushing more institutions to provide more digitised services,” he added.

 The Financial Stability Committee noted that the financial sector is expected to remain stable in the short and medium term, despite the vulnerabilities related to increasing credit risk.