Banking sector opens up, boosts local investments

As the global recession subsides, Rwanda’s cautious banking sector is slowly beginning to open up, more people can now access credit facilities and as a result, local investments have surpassed foreign direct investments.
 Finance Minister, James Musoni. (File photo)
Finance Minister, James Musoni. (File photo)

As the global recession subsides, Rwanda’s cautious banking sector is slowly beginning to open up, more people can now access credit facilities and as a result, local investments have surpassed foreign direct investments.

The growing financial sector, alongside the agriculture sector and the service industries, are the key sectors that have kept the economy growing steadily in the first half of the year, despite earlier fears that the Global Financial Crisis would greatly affect the country’s economic growth.

In an interview with The New Times, Finance Minister, James Musoni said that since last year, financial institutions have shown signs of easing the process of accessing credit as Rwandans slowly adapt a good banking culture.

“There has been some good progress of recent but you have to understand the dynamics; there was a problem of people taking credit from the bank and disowning their obligation to pay back and this caused problems. It was therefore not a problem of banks alone, but of clients also.”

Musoni said banks accumulated non-performing loans, prompting them to become more stringent and cautious when lending. 

“Non-performing loans forced banks to change behaviour, resorting to too much scrutiny of the projects that they get from clients, or even rejecting some of the projects that come to them, because they are looking for more guarantees and cautiously lending than they were doing last year,” Musoni said.

He said that more Rwandans are now learning to build good records with their banks and as trust between banks and clients grows; more people can now access credit facilities.

Musoni acknowledged that with the new land registration programme, people will be able to access credit using land titles as collateral.

He added that the Government is planning to increase guarantee facilities, especially for Small and Medium Enterprises, so that if they don’t have collateral but have good projects to present, they would be financed basing on how good their projects are.

“We already have this facility managed by Rwanda Development Bank (BRD) but we want to improve it and make sure that it’s easily accessible by SMES,” Musoni said.

The minister revealed that local investments have been doing well, surpassing Foreign Direct Investment-largely affected by the crisis largely due to SME’s being able to access credit.

“The inflow of FDI’s has not been as good as it was last year but we are already seeing some projects that had stalled returning-as the recession slows down.” Musoni said, citing Dubai World as one of the foreign companies resuming the projects in Rwanda.

According to RDB, the value of investment projects registered in Rwanda in the first six months of 2009 rose to $646 million from $414 million a year earlier, thanks to major investments in energy and telecoms projects.

The number of individual projects registered fell slightly to 57 from 63 in the first half of 2008, although the proportion of new ventures from abroad remained constant at just over 38 percent, despite the global economic slowdown.

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