Rwandan banks are facing fresh criticism from the regulator for charging relatively high interest rates, stifling credit growth.
At the central bank's presentation of its monetary policy and financial stability statement,
Fresh data released by the
The central bank has kept its repo rate — its lending rate — unchanged at seven per cent since June last year. The country's lending rates are relatively low compared with the regional average.
Latest data show that Kenyan banks' lending rates averaging 16 per cent;
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While deposit rates offered by
Apart from limited though increasing competition, the central bank attributes the rigidities in lending rates to the industry's operating costs, which represent 76.7 per cent of total interest income on average in 2012-2013 and high provisions for bad loans.
The result has been a widening interest rate spread that increased from 6.5 per cent in
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While the central bank cannot impose or control interest rates charged by banks, Mr Rwangombwa said the institution plans to roll out extensive public awareness campaigns to assist borrowers to negotiate for better rates.
"We do not set the interest rates of commercial banks — but when we engage them, we always come back to the pricing of their loans," said Mr Rwangombwa, adding that higher interest rates have an implication on the loan portfolios of banks.
"At the end of the day, that is partly linked to the increase in non-performing loans," he said.
The industry's non- performing ratio rose to 7.0 per cent at the end of 2013, compared with 6.0 per cent at the end of December 2012.
The bankers maintain that their charges are relatively lower compared with the region's, which remain on average above 18 per cent.
They blame structural issues in the economy such as the country's low level of savings, which limits their source of deposits.
"The reality is people who own banks want to make money. We also want to drive down interest rates because it is in our best interest but we also need people to save," said
The industry's consolidated balance sheet measured by changes in total assets, grew by 21.0 per cent to Rwf1,509 billion (
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