Rwanda: Banks Increase Private Sector Lending By 17%

Feb 08, 2019 | The New Times; All Africa

Local financial institutions increased their lending to the private sector in 2018, boosted by reduced risk from borrowers and improvement in the general economic conditions, statistics from the Central Bank show.

The Central Bank said yesterday that in 2018, new authorised loans grew by 17.1 per cent compared to 4.6 per cent in the year before. The Bank's Monetary Policy Committee, which met yesterday, said in a statement that demand for loans, in value terms, went up by 29.7 per cent in 2018 from 10.8 per cent in 2017 while default rates or non-performing loans dropped to 6.4 per cent from 7.6 per cent.

Central Bank Governor John Rwangombwa, said the rate at which financial institutions rejected loan applications was at 21.9 per cent, down from 31 per cent in the previous year. The Bank attributes the positive outlook to the adjustment in its monetary policy as well as improving economic conditions.

The sectors with the highest demand for loans include public works, communication and manufacturing. According to observers, this was largely driven by two major deals including a Rwf50 billion syndicate loan to MTN Rwanda. Moreover, the Central Bank says that more lending and the declining number of loan defaults from borrowers reflects improved economic conditions, which allowed the private sector to borrow more money for investments.

It added that the lower rejection rates also point improvement in the quality of loans a result of multiple aspects such as due diligence by banks and the commercial viability of the projects pitched by borrowers. However, commercial banks are reluctant to comment about the trend, saying that they are still reviewing their 2018 performance, which i among other things involves external audits.

However, the changes in the loans demand must have been driven by the last half of 2018 gong by the previous statistics from the central bank. In September 2018, the central bank had reported that demand for loans had dropped in the first six months of the year as a result of tight lending conditions by local lenders. This had among other things reduced the profitability of lenders. Read more from All Africa.

 

Source: All Africa