This is the second part of an analysis of the banking sector in Rwanda. In this part the writer throws an insight into the country’s banking system by delving into the challenges facing the players.
Much as it is boasts assets totalling $880 million with a total of ten licensed operators the local banking industry has registered glaring shortcomings which the regulator, the National Bank of Rwanda, says needs urgent attention.
The Central Bank Governor François Kanimba told The New Times that within the industry the skill gap presents a nagging challenge for the players.
Kanimba said that the industry is in dire need of nurturing top notch professionals such as investment, corporate, retail bankers and even banking treasury officers to boost service delivery efforts.
”It is true that the skills gap within the industry is actually an issue. It is a problem which to a large extent explains why the service delivery system is still seen by customers as an issue. I think that it is a very serious problem of which we have been looking at ways of tackling it head on,” Kanimba said.
Central Bank has already sought the support of the World Bank for assistance to bridge the skills deficit.
“‘In this exercise we appointed a consultant to assist us but unfortunately the report we got from the consultant was not satisfactory but we are still looking at the best approaches needed to improve on analysing this gap for the purposes of coming up with a road map to build capacity within the industry,” Kanimba added.
The Central Bank says that the tackling of this challenge is an ongoing activity in which the banks themselves have been directly engaged.
Officials say that banks have also been investing in human resource capacities by developing training programmes for their staff members but this has been limiting in one way or the other meaning that Central Bank needs to develop more basic training for bankers.
According to officials this was the main reason the School of Finance and Banking (SFB) was established.
Unfortunately this has so far been received with a lot of scepticism with some saying the industry has not gained much from the establishment of the institution.
However there is a plan to refocus this institution on its primary objectives which was to assist with building capacity within professional training.
As the country’s economy continues to expand the banking industry needs to expand its base of service offerings over and above the normal and routine bank teller services.
The expanding economy is in a dire need for specialized banking service provision.
For instance Bralirwa is yet to issue an Initial Public Offer (IPO) and it is only proper for banks to make a scrum for this opportunity.
The governor said that such issues though important they should not be mixed up with the role of the central bank.
”We are the regulators and as such in terms of sector promotion of such services our responsibility remains secondary and or complementary. It is not the regulator who has to teach the players the kind of services they have to offer”, he said.
However the Governor kept his guard by saying that the Central Bank has a role in the issue of boosting additional services.
The bank has been galvanising a number of public institutions to set up a financial sector development plan. This plan has since been approved by Cabinet and it is under implementation.
The regulator added that the only area still lacking and yet to be looked at was the housing finance sub-sector. ”Our own housing bank is still constrained in that it lacks appropriate resources to develop mortgage finance”, he observed.
Central bank is now working on concrete measures to address this gap by developing a solution known as the ‘Rwanda Liquidity Facility’.
This is a mechanism meant to mobilize longer term resources both from local and other sources for the purposes of refinancing primary mortgage lenders who are mainly the commercial banks and even mortgage houses.
Officials said that when this facility is will be up and running there will streamline the mortgage sub-sector which will have a trickle down effect to the mainstream banking.
Asked whether there was a need to have a bigger banking system in terms of net assets that should expan, the governor said that, certainly there is a need to further deepen the financial sector.
“This is because when you have an economy with only 20 percent of the population being banked this itself provides you with a clear indication of how our banking system is still underdeveloped in comparison with what should the desired standards, ’was his response,” he said.
Rwanda desired to become a middle income economy by the year 2020. With that the country requires an access to banking size of not less than 50 percent.
”You need to understand that from 20 percent to 50 percent leap that is needed means that we still have a long way to go, it should be translated to mean that there is definitely a clear need for more development within the banking system’, Kanimba said.
Central Bank is upbeat about the issue of access to financial service. The Governor says that the focus of getting more citizens to be banked has brought in significant progress registered over the last couple years in tandem with liberalization.
Some of the banks have hard to restructure. Players such as Bank Populaire have been transformed into fully fledged commercial banks.