News Column

Absence of Investment Banks Hurting Devt Efforts - BNR

May 16, 2014

Ben Gasore

The government should devise deliberate interventions to attract big players in the financial sector, especially investment banks, to ease access to funding for long-term and development projects, the central bank has said.

Monique Nsanzabaganwa, the National Bank of Rwanda (BNR) vice-governor, noted that the absence of local funders for big projects could be affecting the country's development efforts.

Nsanzabaganwa said though the commercial banks presently partner to finance big and long-term projects using syndicated loans, there was an urgent need to attract big global funders into the sector.

In an interview with The New Times she noted that having locally-based big project funders makes credit more affordable, and is essential to support the country's growth agenda, EDPRS II, that is aimed at delivering Rwanda to a middle-class economy by 2018.

The banking sector is made up of 10 commercial banks, four micro-finance banks, one development bank and a co-operative bank. Commercial banks account for 78.6 per cent of the sector's total assets.

Nsanzabaganwa also noted that there was a mismatch in the local financial sector, with big project borrowers compelled to start repaying loans when their ventures have not yet started earning income.

"People implementing big projects do not have to start repaying loans immediately until they start earning from the businesses," she said.

Nsanzabaganwa noted that by the time borrowers start earning from the venture they would have used up all the capital, without implementing their project.

She also said presently, commercial banks are 'forced' to finance long-term projects like hotels, real estate and mortgages.

She pointed out that ideally, commercial banks finance short-term projects that take a few months to implement, while investment banks fund long-term ventures.

Jean Claude Karayenzi, the managing director of Access Bank Rwanda, said local banks provide short to medium-term credit facilities like overdrafts and personal loans to small-and-medium enterprises and people who want acquire assets like houses, cars or to pay their children's school fees.

He, however, added that banks work with external funders in case clients require long-term credit which they cannot mobilise locally.

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Source: AllAfrica

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