More Rwandans taking loans

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More Rwandans taking loans

The number of people taking loans from micro finance institutions and banks has more than doubled in the first quarter of this year compared to the same period last year according to the governor of the National bank of Rwanda John Rwangombwa.

Increase in loan acquisition has been attributed to the increase in financial inclusion for all, a strategy by the government that aims to propel the country to a middle class economy.

Majority of the loans acquired are business set up loans and mainly go to small medium enterprises and cooperatives moves that the government thinks will widen the private sector that has been noted to be a major contributor to the projected leap frog.

The new loans to the private sector from banks rose by 47.8 percent between January and June 2014, from a decline of 12.4 percent in the same period last year.

But some banks have warned that the recent streamline of jobs in the public sector is set to affect loan payments as some of the laid off staff had business and mortgage set up loans.

“The streamline of the public sector had not been foreseen by many as civil servants on long term contracts used their work contracts as insurance for loans,” notes Frank Abaho of Rwanda development Bank.

Deposit interest rates stabilised at 8.5 percent in 2014, from 10.9 percent last year, and interest rates on loans stabled at 17.2 percent from 17.3 percent.

Some banks though think the increased credit rating is due to the increased completion among financial institutions in the country, an example is the new AB bank.

Barely six months since AB Bank Rwanda opened shop in Rwanda, the micro-finance bank has already handed out Rwf1b in credit.

“We have seen strong demand from clients, mostly micro and small business owners,” said Christophe Kneiding, the AB Bank Managing Director.

The bank has flexible terms as regards the collateral requirements and one is able to access funds within four days of submitting their loan application.

“This is how we have managed to record 1,300 loan and about 4,000 deposit clients,” he said.

The bank has two branches Nyamirambo and Nyarugenge sectors in Kigali.

Kneiding said they have established a loan department for small-and-medium enterprises for loans of more than Rwf10m.

In 2015, AB Bank plans to establish its first branch outside of Kigali.

AB Bank is a subsidiary of Berlin based Access Holding Network which currently comprises of eight commercial microfinance banks in developing and transition economies in Africa, Caucasus and central Asia.

Their target clientele are low and middle income households and micro and small businesses.

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Olive Ndaka is the Junior Editor for RwandaEye. An investor and young entrepreneur, she is a quick learner and has contributed many articles for RwandaEye in Kinyarwanda.

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