COVID-19: Banks commit to shore up the economy

Clients queue in a banking hall of one of the commercial banks in the country. Local banks have adopted a number of measures to help reduce physical contact as the country steps efforts to curb the spread of COVID-19. Photo: File

Local commercial banks have committed to help ease the impact of the novel coronavirus pandemic on the Rwandan economy.

The COVID-19 outbreak, which has since disrupted local businesses since the country recorded its first case on Saturday, is expected to significantly shake the global economy.

 

But commercial banks in Rwanda have since devised strategies to support the economy in the wake of the pandemic, bankers say.

 

The raft of interventions that have since been rolled out include easing loan repayment conditions for borrowers whose income have been severely affected by the virus.

 

However, Rwanda Bankers Association chairperson Robin Bairstow told The New Times that the eligibility of borrowers for repayment holidays or other interventions will be determined on a case by case basis.

Each bank will assess their client’s legibility on an individual basis, he said.

Depending on the impact on a borrower, he said, appropriate interventions will be considered such as increasing repayment periods, among others.

The pandemic is expected to have significant negative effects on a range of businesses, especially those closely linked to tourism, aviation and hospitality sector in general.

Bairstow, who is I&M Bank Rwanda managing director, also said that local banks will not halt operations and will keep injecting money into the economy to provide much-needed capital for businesses as well as keep value and chains open.

This will help save enterprises, jobs, among others.

He said commercial banks are confident in their ability to shore up the economy during this period thanks to their current liquidity levels and a range of recent interventions by the central bank.

A view of the current and proposed I&M Bank headquarters in downtown Kigali. Bairstow said that banks are committed to helping the economy remain afloat amid the COVID-19 outbreak. / Photo: Dan Nsengiyumva.

The National Bank of Rwanda (BNR) on Wednesday announced a Rwf50 billion stimulus package for local banks, which they will access in the form of loans.

The idea is to boost local banks’ liquidity levels so they can, in turn, scale up their lending to the private sector.

The fund will be flexible with windows ranging from overnight to 3, 6 and 12 months, officials said.

Normally, the central bank maintains a range of liquidity facilities such as intra-day liquidity facility, overnight lending facility, reverse repo for seven days and refinancing facility for seven days which ensures than tanks can lend.

Effective April 1, BNR is expected to lower the reserve requirement ratio from 5 per cent to 4 per cent to allow banks more liquidity to support affected businesses.

This, Bairstow said, will increase liquidity by up to Rwf26 billion, effectively increasing funds available for lending to the economy.

To further ensure that banks have money to support Rwandans during the virus containment period, the central bank reviewed the existing Treasury Bonds rediscounting window.

For the next six months, BNR has offered to buy back bonds at the prevailing market rate. The regulator also reduced the waiting period if one fails to sell the bond at the secondary market from the current 30 days to 15 days.

Bairstow said that this further boosts local banks’ lending capacity.

Local banks also committed to supporting measures of reducing physical contact with view to reducing the risk of transmission of the virus. Among the measures is reviewing costs of digital payments such as removing costs on account transfers, push and pull services among others.

The development will also see traders accepting payments via contactless point of sale and mobile money platforms, and virtual points of sale such as QR codes will not be required to pay any fees when accessing payments by clients.

This, in turn, encourages traders and merchants to accept contactless payments as the commission fees previously imposed has been temporarily removed.

Those depositing cheques are encouraged to transfer the payment into their accounts or receive the money in their mobile wallets.

To encourage digital banking and social distancing, banks have reduced operational hours (now closing at 5p.m from 8p.m) to reduce hours of physical contact in banking halls.

In anticipation of a spike in demand for digital payment platforms, Bairstow said banks have committed to ensuring that the digital payment services remain uninterrupted while guaranteeing faster response in the event of incidents.

cmwai@newtimesrwanda.com

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