Commercial banks in the country have disbursed a record Rwf70 billion high in loans in third quarter of the year.
The increase in loans to local investors signals a recovery from the economic crisis that caused a liquidity crunch in banks for the whole of last year.
“The banking sector is improving with higher liquidity compared to last year and this explains the huge disbursement of loans,” said Francois Kanimba central bank governor.
Major sectors that benefited from the loans included coffee, consumer goods, construction as well as manufacturing.
According to Sanjeev Anand, Managing Director of Rwanda Commercial Bank (BCR), the increase in liquidity and loans can also be attributed to the general improvement of the economy as well as a sound coffee buying season that was experienced in the last quarter.
However, it was noted that most of the funds end up in urban areas although there is an increasing economic activities in upcountry.
Rwandan economy for the last six months has been growing impressively especially in services, construction as well as exports growing by 25 percent compared to last year same time.
The increase in loans by the commercial banks comes at a time when the National Bank of Rwanda has maintained it key repo rate for the commercial banks at 7 percent.
The key repo rate is a rate at which the Central Bank lends to commercial banks and the higher the rate the more it is likely to reduce the liquidity in the banking system.
In a separate interview, Kanimba said that the central bank expects an improvement in the credit conditions as the cost of funds remains stable and the banking liquidity sufficient due to the new interest policy rate.