Hard Times for Rwandan Banks as NPLs Rise

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The number of local businesses men and businesses going through financial distress is on the rise. This has seen Rwanda’s Central Bank (BNR) report more Non performing Loans.

The quarterly financial stability committee and monetary policy committee meetings (MPC) reveal NPLs increased by 8.1 percent from 7.5 per cent in December 2016.

As Rwanda’s overall banking sector performance has continued registering positive growth, in the same period, the NPLs ratio of MFIs increased from 8.5 percent to 11.7 percent.

Experts attribute the rise of NPLs to banks being hesitant to tighten credit rules to avoid losing customers to other lenders, especially microfinanciers and saccos whose lending standards are less stringent.

The industry report noted that the increased NPLs are due to weak credit analysis, monitoring, poor project design and implementation.

To contain growth of NPLs, the central bank will have to engage financial institutions on enhancement of their credit underwriting and monitoring standards.

“Given the state of affairs Banks will have to intensify credit recovery efforts so as to mitigate the likely increase in non-performing loans due to high interest rates “BNR said.

Rwandan banks are on course to delivering super profits this year having posted 9.8 billion at the end of March 2017.

Available date indicate total banking system net profit after tax amounted to 9.8 billion in March 2017. In the same period, microfinance sector profit was 937 million, while that of the insurance sector was Frw 8, 7 billion, up from 5.9 billion achieved in March 2016.

Outstanding credit to the private sector grew by 6.9 percent against 6.6 percent in the same period of 2016 while total authorized loans expanded by 9.0 percent in the first five months of 2.7 percent of the corresponding period of 2016.

 

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