Central Bank should help build more confidence among lenders

STATISTICS by the National Bank of Rwanda (NBR) indicate that new authorised loans by commercial banks hit Rwf69.33 billion in the second quarter of 2010 (April – June) compared to Rwf52.6 billion from January to March.

STATISTICS by the National Bank of Rwanda (NBR) indicate that new authorised loans by commercial banks hit Rwf69.33 billion in the second quarter of 2010 (April – June) compared to Rwf52.6 billion from January to March.

This figure means that in the first six months of this year, commercial banks issued out Rwf121.93 billion to the private sector in total loans compared to Rwf83.8 billion in the same period last year.

This shows that despite the 45.5 percent growth in authorised loans, outstanding credit to the private sector grew by only 1.5 percent in May this year, with a significant improvement in June, leading to an increase of 3.2 percent compared to 2009.

Last year, the private sector’s enthusiasm to invest and grow was held back by the liquidity crunch in the local banking system coupled with the global economic slowdown that affected the export sector considerably.

However, the Central Bank’s aggressive monetary policy—which comprised of slashing key rates and setting up a cash stimulus package—is starting to pay off with positive projections in all sectors of the economy.

Rwanda’s Gross Domestic Product (GDP) growth is expected at 7 to 8 percent in the FY2010/11 and this ambitious projection will only be attained if commercial banks continue to loosen up on their reluctance to lend to the public and the private sector.

The Central Bank, as the institution responsible for controlling and regulating money supply while protecting the welfare of the people, needs to continue building confidence in the lending institutions, mainly through strengthening banking and financial systems, improving economic policies and corporate governance within financial institutions.

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