News Column

Rwanda Central Bank Promises Stability in Sector

August 25, 2014

The Central Bank of Rwanda (BNR) has given assurances of its commitment to maintain financial stability in an area that is mainly dominated by the banking sector.

"BNR will make sure that the financial sector remains stable by monitoring the soundness of financial institutions under its supervision," BNR Governor, John Rwangombwa said while presenting the Monetary Policy and Financial Stability Statement last week.

"Banking sector of the country represents 67.6% of the financial systems total assets microfinance contributing 5.6%, non- banking financial institutions contributing 26.7% and here we have the insurance that accounts for 9.4% and pension 17.3%," the Governor said.

He said capital markets and payment systems have also helped the financial system of the country to remain robust and health and this has been seen since the last quarter of the year 2014.

"This is mainly because of the strengthened financial regulations and supervision role played by BNR plus the good macroeconomic environment which has continued to increase the effective functioning of the sector," Rwangombwa said.

The number of ATMs, debit cards, and credit cards has increased by 6%, 21% and 32% respectively which show a strong banking system in the financial sector of the country.

Industry balance sheet as measured by total assets grew by17.0% a growth from Rwf1.51billion (around $2.1 million) of December last year 2013 to Rwf1.76billion in June 2014 and this growth is attributed to loans given out to the private sector which increased by 7.2%.

"On liability side, deposits grew from Rwf1.01billion achieved end of December 2013 a 20.6% growth, to Rwf1.23billion by the end of June 2014," the governor said.

This sector remains resilient with Capital Adequacy Ratio standing at 23.6% by end June 2014 as compared to 23.1% achieved last year 2013 end of December.

In case of the market rates deposit lending rates and lending rates declined and this is in line with BNR monetary policy stance that is aimed at stimulating credit to the private sector.

"Deposit rates stabilized at 8.5% in the first half of 2014 from the 10.9% registered same period last 2013 whereas the lending interest rate remained stable at around 17.2% from 17.3% in the period under review," the governor said.

Under the microfinance, Saccos have contributed a lot to better performance of the banking sector.

The sector asset size increased by 14.5% between December 2013 and June 2014 a rise from Rwf128.7billion to147.4billion.

"This was mainly driven by the liquid assets and gross loans that increased from Rwf42.1billion to Rwf53.4billion and Rwf73.5billion to Rwf81.2billion respectively," the governor said.

The liquidity conditions of the banking system have also continued to improve and which is as a result of the accommodative monetary policy and liquidity injection from the fiscal operations experienced towards the end of 2013/2014.

The governor said banks most liquid assets increased by 28.1% standing at Rwf297.3billion by end of June from Rwf29.0billion it stood at by end December 2013 and this was due to banks' cash in vault (+5.3%) outstanding repos (+191.5%) and outstanding T-bills (+2.6%).

The financial system goes across the country not leaving out any province and again all people are involved (both men and women).

The governor explained the inflationary state of the country saying this has been also maintained.

"During the first quarter of 2014, Rwanda's inflation was maintained below the expectation which is 5%and is further expected to remain low during the 2ndquarter because of the sustained and well coordinated monetary and fiscal policies plus limited inflationary pressures from trading partners," Rwangombwa said.

Inflation in Rwanda declined to 1.4% in June from 1.9% in May of the same year which shows stability in inflation.

In Sub-Saharan Africa inflation slowed down in most countries and this is as result of stable global commodity prices, favorable weather conditions and tight monetary policy.

"Inflation slid to 6.3% in 2013 from 9.0% of 2012 and is expected to go down more to 6.1% in 2014 and to 5.9% in 2015," Rwangombwa said.

He said inflation in the EAC has also remained moderate and this is because of efficient monetary and fiscal policies plus the good agricultural performance though some seasonal shocks existed.

Headline inflation in Rwanda on average decreased to 2.6% during the first six months of the 2014 as compared to 4.3% of the same period 2013 whereas food inflation dropped to 3.7% from 5.9%.

The governor noted that food inflation slowed to 1.9% in June from 2.9% May 2014 and this is because of the decline in prices for fresh products from 3% to -0.5%.

"Vegetable price here that contribute 36% of the food basket declined by 4.7%," he said.

The efforts put in maintaining the financial stability of the country were recognized by both the Minister of trade and industry Francois Kanimba and the UN One resident coordinator in Rwanda Lamin Manneh.

In his remarks Kanimba said the quick speed at which the payment system is being modernized is very important since it is having a very important impact on service delivery

He however said there was need to support exporter in the country through development of different mechanisms so exportation of the country could grow as targeted by the government.

"Exporters need to gain access to finances more easily and banks need to reduce on interest rate at which they acquire credit and this will help bring in competitiveness of the exporters," the minister said.

Lamin Manneh noted the bank has a very activist monetary policy which is accompanying development and transformation of the country and here he requested the bank to continue moving in this direction.

BNR will continue to maintain its accommodative monetary policy to continue stimulate credit to the private sector as long as inflationary pressure remains contained and again the monetary committee will continue to monitor both domestic and international economic environments to take appropriate decisions in due course.

The bank looks forward to cutting on the benchmark lending rate which will be decided on in September 2014.

Again Rwanda considers listing another Eurobond as said by the Permanent secretary ministry of finance and economic planning Kampeta Sayinzoga which will be used in development of the many projects in the pipeline.

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Source: AllAfrica

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