Bank profits grow by 14% as insurance remains vulnerable

Profits for the local banking sector grew to Rwf26.2 billion in the first half of 2019, up from the Rwf22.9 billion in the same period last year, according to details from the Central Bank.

The profits were largely driven by net interest income generated from loans, which grew Rwf120.2 billion.

Other investments by local banks that drove the profits were government securities and placements as well as market securities.

In the first half of the year, a majority of the loans were: Mortgage services (Rwf672.6 billion), trade (Rwf301.7 billion), transport and communications Rwf249.5 billion as well as hotels and restaurants.

Mining and agriculture sectors were the small recipients of loans from banks largely due to lack of adequate data on operations in the sectors.

Local financial institutions have from 2018 increased their lending to the private sector boosted by reduced risk from borrowers and improvement in the general economic conditions.

In 2018, new authorised loans grew by 17.1 per cent compared to 4.6 per cent in the year before.

However, the insurance sector remains vulnerable despite registering profits.

As has been the case over the previous years, the insurance sector made a loss in underwriting (their core business) and only made a profit in other investments such as real estate, equities and government securities.

In the first half of this year, the sector made an underwriting loss of Rwf0.9bn.

Private insurers made a profit Rwf4.7 billion as of June 2019 from a profit of Rwf2.7 billion in the first half of last year.

The sector’s vulnerability is largely due to the dependence on motor and health insurance which generates about 74 per cent of the revenues to the sector.

The sector has long been said to lack innovation and has remained traditional hence limiting its growth.

editor@newtimesrwanda.com

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