Kenya Commercial Bank (KCB) Rwanda has reported a net operating loss of Rwf 690 million for the first half of this year for the period ending June 30.

KCB, which is the latest entrant into Rwanda’s banking industry, says the loss was due to heavy start-up infrastructure investment including full branch network expansion and human resource recruitment.

"The second year of operation is the year in which we will incur the biggest loss and the reason for that is that we now have all the bank’s infrastructure in place. In this second year of operation, we are incurring very high costs,” Maurice Toroitich the Managing Director of KCB Rwanda told Business Times on Tuesday.

"KCB Rwanda expects to incur the highest loss this year but expects its revenue grow for the bank to become profitable,” he said. 

Revenue will grow from the first year of operation onwards so that by end of the second year the bank will breakeven.  "Going into the third year and beyond we will be operating at a profit.” 

The bank says that despite the loss in net earnings, it has seen significant growth with total assets increasing by 60 percent to Rwf 25 billion compared to Rwf 16.1billion for the whole of last year.

KCB also increased lending with loans and advances growing by 148 percent in the first half of 2010 to Rwf 9.4 billion from Rwf 3.8 billion in 2009; spread out in mortgages, construction loans, Small and Medium Enterprises (SMEs) and personal lending.

"We have also approved facilities in agriculture intended to fund agricultural projects (agro-processing),” Toroitich said.

The bank said that its customer deposits climbed by 126.7 percent to Rwf 17 billion up from Rwf 7 billion collected last year due to a significant growth of its client base.
However, the bank’s biggest challenge remains sustaining an efficient customer service with the growing client base amid shortages in human resource skills.

"Recruiting staff was a big issue last year but now it is solved; we are now training. We have invested a lot of money in training but it takes time to improve the turn-around time,” he observed.

The bank’s efficiency is also hampered by technology with its network connection slowing down during afternoon, causing delays in service across the counter.
The Managing Director explained that the delays are due to satellite connection (VSAT) used by the bank to connect KCB group in the region.

"Service is still an issue because we have an online system which is connecting the whole of East Africa, because of telecommunication challenges; to the extent that we do not have fiber optic yet. We are using VSAT which is slow and expensive,” Toroitich said.

As a result, he said KCB Group does not operate large bandwidths that are capable of channeling all the data.
"We are hoping that as soon as the fibre-optic linkage through Kampala is in place, our speed shall improve. This is one of the reasons causing some of the queues that you see at the branches. The time it takes to process a transaction is much longer than it should be.”

KCB Rwanda, a subsidiary of Kenya’s KCB Group, started operations in Rwanda in 2008 and has expanded its network to 9 branches. KCB Group is also the only company that is quoted on the Rwanda bourse following its cross listing in 2009.

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