Non-performing loans (NPLs) continue to bedevil development banks in Africa. The situation has forced financial experts on the continent to join hands and find ways of addressing the issue. The move, experts say, could help make the continent’s development banks more competitive.
Speaking during a training workshop for continental development bank experts in Kigali last week, Alex Kanyankole, the Development Bank of Rwanda (BRD) chief executive officer, said equipping financial institutions with right skills will help strengthen Africa’s development banks and reduce bad loans in the sector.
“Non-performing loans has become a serious challenge to the sector. So, we need to develop our capacities, skills, and work out strategies to manage our banks professionally and profitably,” Kanyonkole said.
The five-day training workshop on loan management systems and procedures was attended by 12 financial experts from 11 countries, including Ghana, Malawi, Mauritius, Kenya, Uganda, Tanzania and Ivory Coast.
It was organised and facilitated by the Association of Africa’s Financial Institutions and BRD.
The training aimed at strengthening development banks on the continent so that they are able to improve their operations, according to Kanyankole.
Richard Singa, a director at Kenya’s Africa Financing Corporation, called on development banks to work out strategies to strengthen the banking environment on the continent.
“This will allow more access to credit, facilitate investments and create strong linkages between financial institutions and customers,” he said.
Non-performing loans can significantly affect the performance of institutions if the challenge is not addressed, according to John Mwebembezi, a Ugandan banking expert.
“We need to be keen on how we manage loan procedures, especially by explaining to clients why servicing their loans regularly is in their interest,” he noted.
He added that financial institutions must embrace documentation as a critical tool to address NPLs.
“If the documentation is done properly then you have something to hold on before making decisions,” Mwebembezi said.
Rwanda’s NPLs ratio declined to 5.9 per cent in June, down from 6.6 per cent in 2014, according to central bank statistics.