During the course of the year 2010 it can be said that the licensed banks steadily adjusted to the reality of the fast changing economic landscape in Rwanda. Bankers literally chased down business wherever it was through adoption of new approaches within the practise of banking.

The sector also witnessed a profound readjustment in how individual players did business by revaluating changing industry cost structures and other related market conditions.

Readjustments that have been carried out by cutting down on operational costs in the industry were meant to enable bankers to jostle for more market share at a time margins were dwindling partly due to the increased competition.

Banker for instance went into an overdrive to embrace new banking practises and adopted new technology that was meant to reach out to customers through opening up of new branches while some went as far as trying to reach out to clients by offering them business training packages.

These are some of the features of the fast changing landscape that has been the face of the banking industry in Rwanda during the course of the year 2010.

Going forward, the envisaged economic transformation is creating huge opportunities for banks to make a difference in areas such as the current construction boom that will ultimately impact positively on the local mortgage industry. On the other hand Small and Medium Enterprises (SMEs), which are seen as the key drivers of Rwanda’s economic transformation agenda, are being given more attention by banks through tailored solutions that address their challenges, enhancing their growth and eventually translating it into new avenues for banks to make more cash.

A vivid example is Rwanda Commercial Bank (BCR) which has repositioned its self by shedding off non core cost structures and championed a concept that is meant to assist SMEs through a business training programme due to be launched early next year.

"We are launching and initiating a training programme that is meant to improve the financial and accounting standards of some SMEs that bank with us. We will arrange for experts to facilitate this programme,” Sanjeev Anand, the Chief Executive Officer (CEO) of BCR told Business Times.

He said that the $75,000 programme will be rolled out in close concert with other institutions. The combination of such new approaches means that banks are increasingly getting closer to their retail, corporate and international customers through adoption of new technology and new branch networks and new working relations with their clients.

Ne players such as Actis, Rabo Bank, Ecobank, Access Bank, Fina Bank and Kenya Commercial Bank (KCB) in the last 3 years have brought in a new generation of bankers who are eager to understand and serve their clients. The net effect is that banks are now able to post healthier results by restructuring to stay more agile.

"We had some debt recovery issues to sort out. We had to correct the huge cost base we had. We had some bad contracts for outsourcing, which had to be renegotiated. We had procedural problems that had to be realigned. By end of this year all these challenges are now considered to be history at BCR,” Anand said.

The central bank says that during the course of the year 2010, the banking industry witnessed increased competition in the mobilisation of deposits which stood at $800 million as at mid this year after a decrease during the first quarter of the year 2010. This signalled that public confidence in the banking sector had increased, according to the central bank.

A baseline survey that has now mapped the service levels within the sector that was undertaken in 2008 known as "Rwanda Finscope”, called for rallying of licensed players to increase branch networks. The central bank says that during 2009 over 22 new branches were opened while in 2010 the growth in branch network is expected to be higher than the 2009 results.

Another key indicator of healthier results can be seen through what central bank terms as upgrades in asset quality being registered by banks. The central bank reports that the sector is registering a steady decrease in Non Performing Loans (NPL).For instance the ratio of NPL to the total loan book of the entire sector is now expected to reach the regulator’s threshold of 7 percent this year from 13.1 percent last year.

"The general performance can be said to be good. The industry is in a better state today than it was a year ago. While we can say that banks still have some residual problems, banks are entering the New Year on a better footing,” Anand who doubles as Vice Chairman of Rwanda Bankers Association (RBA) said, adding that the sector is bracing for a more competitive environment next year than this year.

However he cautions that the seemingly large cost bases need to be addressed.

"It is a combination of several factors. The cost income ratio within the sector is still relatively high but such challenges can still be tackled”, Sanjeev added.

The BCR boss attributed the huge cost base within the sector to skill and capacity constraints, meaning that banks have previously, been hiring and retaining larger than necessary number of staff which had to be catered for through higher spreads and higher margins.

"Now that margins have started declining owing to increased competition banks are now forced to cut costs to remain leaner.”

The arrival of partnerships between banks and telecoms companies also marks a new chapter in the local banking industry.

Bank Populaire Du Rwanda appears to be standing head above the shoulders of other players due in part to the fact that it the largest bank by customer base and due to its reputation as a "grassroots” bank, which places it in a suitable position to bring in the critical mass needed for mobile money services.

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