Among the key and influential positions at any financial institution is serving on the Board of Directors. The National Bank of Rwanda recenly issued directives on the eligibility of persons to serve as independent directors of a financial institution. Independent directors are part of an institution’s Board of Directors. An independent director is the member of Board who does not own any shares in the company and does not have any monetary relationship with the company except by remuneration. Independent directors do not have any material relationship with a financial institution, meaning they do not hold shares. According to the recently issued guidelines, signed by the Governor of the Central Bank, John Rwangombwa, the independent directors ought not to have any management relationship with the said financial institution by employment or close family members. The same directive further notes that independent directors ought not to have current business relations with the financial institution or its related parties including holding shares. That way, the only compensation they should be receiving from the financial institution is from sitting allowance or board member allowances. In instances where the independent director has previously been employed by the financial institution, it should not be within the last three years. The new directives also require that there should be no connection to significant shareholders of a financial institution such as family, business partner or by employment. The central bank also noted that independent directors ought not to represent any shareholders interest or its related companies. The directives are viewed as important towards improving the quality of governance, transparency and reducing practices that are oriented towards self-interest of parties. The central bank have local financial institutions one year transition period for operators yet to meet or comply with the directives. The move development will affect institutions such as banks, micro-finance institutions as well as insurance companies.
