KIGALI - Rwanda Development Bank (BRD) has said that it increased lending to the economy by 5 percent last year following an increase demand for credit from the private sector that signaled rebound in economic
The Bank’s unaudited financial statements for year ending 2010 indicate that loan approvals increased to Rwf27 billion from Rwf25.75 billion in 2009.
Jack Kayonga, the Managing Director of BRD told Business Times in an interview on Wednesday that over 50 percent of approved loans were channeled in support of agriculture, commercial real estate and hotels.
“We have diversified (the portfolio) but agriculture still remains a key sector; until we reach a certain point in time when the commercial banks and other financial institutions have increased their lending to agriculture – as a development bank we always finance sectors that are least served in our endeavor to reduce poverty ,” he said.
Agriculture accounts for over 45 percent of the bank’s loans disbursed to the economy.
However, despite the significant high level of loan approvals, the bank registered a modest decrease of 5 percent in disbursements, from Rwf14.8 billion in 2009 to Rwf14 billion last year.
“Most of the approvals are disbursed in a period of one year; this is because of the nature of the projects – if you are building a hotel and we allow you $2million you do not need all the money at once;growth in disbursements is expected in 2011,” Kayonga also observed the bank experienced increased requests for loan restructuring of distressed export clients due to spill over affects the global financial crisis in 2008-9.
The borrowers (coffee farmers) were unable to pay their loans because they received terrible returns; the average price of coffee reached a tune of about $2 in 2008-9.”
Since 2003, BRD has been supporting farmers in form of soft loans to build coffee washing stations and to expand their businesses.
The Bank’s asset quality deteriorated during 2010 with gross non-performing loans increasing to 13.4 percent of the total loan portfolio from 7.48percent in 2009.
“This was a strategic prudential measure that BRD has adopted by fast tracking problem loans,” Kayonga said.
However, their gross income grew by 39 percent from Rwf6.6 billion to 9.2 billion due to significant growth in interest income, the write back on provisions on non-performing loans, dividends from equity investments and gain on the disposal fixed assets.