Zigama Credit and Saving Society, the financial institution for former and current servicemen and women, has taken the unprecedented step by cutting down its interest rate by two points; from 15 per cent to 13, making it one of the most competitive on the commercial loan circuit.
Commercial bank rates in the East African region are some of the highest on the continent, usually hovering around 20 per cent; therefore, accessing commercial loans becomes a very risky venture because of the prohibitive repayment terms.
In Rwanda, there has been a hue and cry over the high interest rates, with appeals to the government to lean on commercial banks to reduce their interest since the central bank has continuously revised its Repo Rate downwards – currently at 6.5 per cent.
Repo Rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds.
But all the cries continue to fall on deaf years as banks come out with more excuses, especially the high risk of defaulting loans. The move by Zigama CSS, which is smaller than the major commercial banks operating in the country in terms of portfolio, should dispel their fears.
Banks should not be seen to be exploiters but as partners in national development so that both sides benefit mutually. The government lends the banks at a very low rate and it would, therefore, make sense if they reciprocated the gesture.