FINA Bank Rwanda has said it is under pressure to improve the quality of its balance sheet by recovering inherited bad loans worth approximately Rwf2 billion by the end of this year.
This follows the acquisition of a formerly insolvent private owned commercial bank known as BACAR in 2004.
In an interview with Business Times, Steve Caley, the Managing Director of Fina Bank said that the bank has invested both human and capital resources to recovery the bad loans by the end of this year.
We still have substantial impaired assets from the acquisition of the bank and we are still working on how to get those back. There is room for the next few months and even next year for us to recover quite substantial amounts probably between Rwf 1 to 2billion in total, Caley said.
While the Bank inherited a huge loan book with approximately 85 percent being bad debt technically referred to as Non Performing Loans (NPLs), Caley says the Bank has been able to trim down to 16 percent.
We have grown the loan book as well but I am glad to say that on the new account it is not substantial. We are now working to get judgments and be able to sell assets and this is a long process, he said.
The bank says recovery has been affected by peoples inability to pay or unwillingness though the situation has been exacerbated by issues with the legal system.
A lot of cases are getting into court but there are postponed or deferred rather than being heard, Caley observed.
However the Banker also mentioned that the economic environment has been generally slow since the beginning of this year and this has had a negative impact on recovery process.
Due to lack of liquidity, where we have judgments: some of the auctions (property) that we try to set up to dispose off property do not attract the level of bids that we would be hoping for, he explained.
According to Caley who also doubles as the Chairman of Rwanda Bankers Association, banks in general have had a tough beginning of the year due to some degree of stress on the economy.
We have all had difficulty but we are optimistic that in the second half we will return to more settled economic times. We hope that after the election when peoples concentration gets back to business that there will be a better second half of year. he said.
This year the Central Bank has put the NPLs ratio threshold to 7 percent for commercial banks.