Rwanda Commercial Bank (BCR) will expand its loan book this year to cater for the increasing demand of credit from the privates sector, signalling a steady recovery from last year’s credit squeeze, the Bank’s top management has said.
In the first major sign of recovery, BCR disbursed between Rwf2b and Rwf3b in loans in the first quarter of this year, in addition to the Rwf3b in the pipeline, management says.
“My shareholders and my directors are backing me on this – to grow my loan book. But we need good quality applications,” Sanjeev Anand, the Managing Director of BCR told Business Times in interview last week.
BCR said in its annual financial statements that last year its loan portfolio slid by 26.5 percent with net loans reducing from Rwf43b to Rwf34b owing to a conservative approach to the Bank’s loan portfolio growth.
“Our net credit last year shrunk...because we have amortising loans, mortgages and the reason for that is we were focusing on fixing up our book. I did not want to put out new loans until I had cleared
the existing problems,” Anand said
Last year the bank managed to collect at least Rwf2.5 billion in recovery after overhauling its recovery department.
Yet, the entire banking sector registered a slight overall decline of asset quality with non performing loans ratio of 12.8 percent compared to 12.6 percent in 2008.
BCR also registered a drop in its net income from Rwf898m in 2008 to Rwf859m in 2009 on account of the slow growth of the Rwandan economy and the global financial crisis.
To grow its loan book the bank also intends to resume mortgage lending and leasing facilities.
Last year the bank resumed its mortgage financing facility after holding the product for about six months after exceeding its ceiling of Rwf2b by 50 percent.
For this year, the bank says it will be interested in financing finished houses.
“We need good quality applications,” Anand said.
BCR‘s appetite to give out loans has also been boosted by the Central Bank’s long term deposit facility put in place last year to encourage banks to resume long term financing.
Without revealing the exact amount taken from the Central Bank’s long term refinancing facility, Anand said that his bank had so far utilised the facility for two transactions.
To boost liquidity levels within the banking system, the Central Bank recently reduced the rate at which it lends to Commercial banks from 9 percent to 7.5 percent.
The discount window rate has also been revised downward from 12.5 percent to 11.5 percent.
“We do expect that this reduction of the cost of funds for commercial banks will stimulate the lowering of bank’s lending rates,” Ambassador Claver Gatete, the Vice Governor, National Bank of Rwanda said.
The Central Bank has also said it will continue to implement a proactive monetary policy during the year 2010 to ensure that the level of the banking system liquidity.