The Development Bank of Rwanda (BRD) has released loans worth Rwf11billion within the ten months of 2009, showing resilience to the liquidity crunch that hit the local and international financial sector this year.
This represents an increase of 34.4 percent from Rwf8.540 billion that the bank disbursed for the whole year in 2008. BRD projects its loan disbursement to reach Rwf15billion by the end of this year.
As of October this year, BRD‘s loan approvals amount to Rwf22billion of the Rwf22.5 billion target for this year, translating to 98percent execution.
“We financed a lot of non – traditional areas like renewable energy, education, ICT (Soft ware development) and industrialization,” Jack Kayonga, the Managing Director of the Bank told Business Times in an interview on Wednesday.
This comes at a time when Central Bank figures show that credit to the private sector dropped by as much as 24 percent in the first half of the year from Rwf94.4 billion recorded in 2008 to Rwf71.7billion.
BRD official said that the bank has injected over Rwf3 billion in renewable energy projects in the country.
Kayonga said that despite the substantial increase in the amount of loans disbursed, the liquidity crunch affected the pace of giving out credit.
“To put it in perspective we did not stop lending, but we could have lent more. We did not have a liquidity crunch but it trimmed “our appetite” for giving out loans,” Kayonga said.
The bank has gone ahead to clean its financial statement by reducing its bad debts to 6.9 percent from 9 percent recorded in the first six months of this year.
BRD also recorded a significant reduction in non– performing loans, which reflect loans in default or close to being in default, by 21 percent from Rwf2.3 billion last year to Rwf1836 million in six months of 2009.
“The low rate of non-performing loans shows that our own input in the management of projects has improved greatly. The projects are performing well hence the economic impact that comes with it,” Kayonga said.
As a result, the bank’s profitability has increased by 138.8percent with a net income of Rwf2billion in ten months compared to last year’s Rwf845.8million.
“The year has been very good for us and the health of the portfolio has also improved,” Kayonga said, pointing out that his bank’s portfolio has so far grown to Rwf33 billion of the Rwf37 billion target for the whole year.
To facilitate its borrower’s capacity to pay back, BRD has sunk approximately Rwf25 million in setting up a department of advisory services that will be operational next year.
The facility will assist in project management regarding pre and post financing, market surveys, recruitments, managerial contracts and restructuring.
“The capacity of the borrowers remains a big issue, especially managerial capacity of the borrowers,” Kayonga said, underscoring that the facility will facilitate borrowers to address such challenges.
To date, agriculture remains the biggest sector that BRD has financed, accounting for 45 percent of the total portfolio.