Targets 3 percent; the lowest in the world
Bank of Kigali (BK), one of Rwanda’s country largest commercial bank has lowered its Non-Performing Loans (NPLs) from 38 percent to 9.7 percent.
This aims at recovering loans from the public thereby increasing the bank’s investments rather than running insolvent.
A NPL is a loan that is in default or close to being in default. A loan becomes non-performing when payments of interest and principal are delayed or past due, depending on the contract terms.
Depending on the specific credit terms, the borrower has to pay interest and to repay the principle at a certain time. This situation leaves the bank’s future uncertain.
Jean Marie Gacandaga, the Risk Manager of BK said that the financial institution intends to even lower to NPLs to 3 percent, which is the lowest figure considered on international level.
“But this is after recovery,” he stressed. The government owned financial institution with 86.5 percent of stake dropped its NPLs from 38 percent in December 2002 to 9.72 percent in December last year.
This is the first reduction in seven years and also exceeds National Bank of Rwanda’s (BNR) target of 10 percent by 2012.
Gacandaga also revealed, “We have seen many cases where loans are diverted, especially in coffee financing and personal loans where job insecurity defaulting is common.”
For register recoveries, the bank management plans regular trainings for clients on loan management to change their attitude towards loan.
“It is challenging but I am optimistic that we (BK) will achieve the target if the trend of is not reversed,” he added. BK is jointly owned by government and Social Security Fund Rwanda (SSFR) also a public parastatal with 13.5 percent shares after repurchasing it from Belgolaise, a Belgian bank that pulled out in 2005.
The bank was last year put on sale to Barclays, quoted as the third largest bank in the UK. However, the deal was later put on hold due to the prevailing global financial crisis.
It was after reports that Barclays is one of the banks hit hard by the current global financial crisis, something that is believed to have affected its investment decisions.