Lending to the public by commercial banks this year went beyond the Rwf500 billion mark in the first nine months of this year, compared to the same period last year, according to latest figures from the central bank.
Gross loans in quarter three of 2011 shot up from Rwf449.4 billion in whole of 2010 to Rwf559.1 billion.
According to the National Bank financial report, deposits and loans increased by 36.4 percent and 42.7 percent, respectively, in September, this year, compared to the same period last year, indicating public confidence in the banking sector.
With new entrant Equity Bank, industry experts say lending to the public is expected to further shoot up as heightened competition will open doors for more competitive products and services.
“In quarter three, deposits increased to Rwf662.37 billion from a combined total deposit of Rwf565.15 billion,” the report indicates.
The report further stated that the country’s banking system is reasonably sound, properly regulated and is in a better position to cope with the effects of any likely financial distress.
Central bank report further showed that the consolidated balance sheet of the banking industry expanded by 38.1 percent in quarter three, this year, compared to same period, last year, with net profit surging by 235.9 percent in September 2011 from Rwf5.2 billion to 17.4 billion.
KCB Bank Rwanda Managing Director, Maurice K. Toroitich, said that the the industry managed to grow its consolidated balance sheet with more interest income from lending.
“Generally there has been an increase in the level of economic activities and now with a stable interest rate, people can service their loans hence leading to tremendous performance generally,” Toroitich explained.
Central bank says that the banking system continues to be highly liquid and profitable with nonperforming loans declining from 10.8 percent at end 2010 to 9.2 percent at end-September of 2011.
The report also stated that in order to strengthen supervision capacity within the financial sector, five more bank inspectors were recruited, bringing the number to 19.
This year saw the country’s leading bank by market share and profitability, Bank of Kigali (BK) launch its Initial Public Offering (IPO).
The lender priced its 300.3 million shares up for sale at the Rwandan bourse at Rwf125 per share, a chunk belonging to government amounting to 45 per cent of bank’s total shareholding.
As the country’s second public offer after Bralirwa, BK targeted to raise Rwf37.5 billion but instead attracted applications worth Rwf103 billion, a subscription rated at 274 percent.
BK’s IPO opened on June 30 and closed on July 29, 2011. During the IPO, BK managed to attract applications from both domestic and international investors.
Equity Bank opens shop
Kenya’s Equity Bank started its Rwandan operations in October, with four operational branches even as the lender targeted nine branches across the country by the end of this year.
However, by close of the year, the lender had not held an official launch ceremony.
Sources say that the bank is set to invest approx US$6.5million (Rwf3.8b) which is anticipated to boost lending to Small and Medium Enterprises (SMEs). Equity says that part of its entry mechanism is premised on eyeing the un-banked in Rwanda through a new approach known as agency banking, an approach its officials say has been very successful in Kenya.
Under the new platform, which holds promises of fundamentally changing the practise of banking in Rwanda, it is owner of the retail outlet, rather than a branch teller, who conducts the basic transactions for clients such as making of deposits, withdrawals, and transfers of funds.
Equity has operations in Kenya, Uganda, Southern Sudan and is expected to open shop in Tanzania. The bank becomes the third Kenyan bank to enter the Rwandan market, after KCB and FINA Bank
Payment system breakdown
The Central bank started implementing a new national payment system, early this year, known as Rwanda Integrated Payments Processing System (RIPPS).However, as at close of the year it seems a lot of ground is yet to be covered before the new system achieves a vast majority of its stated objectives.
The system was meant to enable the economy to shift to more efficient and reliable modes of financial transactions.
The platform brought in three new sub-components, including an Automated Clearing House (ACH- a netting system), a Real Time Gross Settlement Transfer System (RTGS) and a Central Securities Depository (CSD).
The system is meant to facilitate the banking sector to reduce reliance on cash, by supporting new and innovative payments instruments and systems such as the use of Automated Teller Machines (ATMs) and mobile money.
However, the use of ATMs that are connected to the national switch, Simtel, which was rebranded to Rswitch, are prone to periodic malfunctions casting a dark cloud as to the actual usability of the component that handles ATMs.
ATM users, who are mostly connected to Rswitch, are largely frustrated by the malfunctioning and unreliability of the service as both parties (banks and Simtel) continue engaging in a never ending blame game.
VISA Inc boost
Visa Inc. signed a partnership agreement with government to promote electronic payment systems through the use of global visa payments technology.
First of its kind on the continent, Visa Inc. is optimistic that financial inclusion and cashless settlements in all transactions will play a significant role in shaping global commerce and local economies.
Experts are optimistic that Visa’s branchless solutions that is to be piloted in Rwanda will enable clients to use mobile phones to carry out financial transactions including payment of commodities without holding cash.
Under this partnership, Visa together with government will lay basic infrastructure requirements to enable the countrywide use of electronic payments including issuance and acceptance of payment cards and localisation of clearing and settlement services.
KCB breaks even
In the first quarter of this year, KCB Rwanda, a subsidiary of Kenya Commercial Bank (KCB) Group, posted a modest profit on account of a strong growth in customer deposits.
According to the lender’s statistics, KCB recorded a Rwf54m profit in the period ending March 31, 2011, compared to a loss of Rwf740.9m in the same period last year.
KCB management attributed the results to cost cutting measures and income growth over the past one year.
KCB Rwanda had reported a loss of Rwf1.2 billion in 2010, which was about 25 percent lower than the previous year.