By Godfrey Ntagungira
Commercial banks operating in Rwanda collectively earned a total net profit of Rwf60billion (about $100m) as of December 2016, compared to Rwf57billion the year before. Despite the profits, the sector recorded an 7.5 percent increase in Non-Performing loans.
According to the Central Bank non –performing loans (NPLs) ratio of banks increased from 6.2 percent in December 2015 to 7.5 percent in December 2016.
According Central Bank describes this trend of rising non-performing loans as worrying.
In the same period, NPLs of the micro fiancé sector increased from 7.9 to 9.0 percent. Also in the same period microfinance sector profits (before tax) increased from Frw 6.8billion to Frw 9.9 billion boosted by reduced operational costs and increased fee and commission income.
Overall, the total banking sector net profit (before tax) increased from 57 billion in 2015 to 60 billion in 2016. In the same period. The microfinance sector profits increased from Frw 6.8 billion to Frw 9.9 billion boosted by reduced operational costs and increased fee and commission income.
Profits of the insurance sector also rose from Frw 21.9 billion in December 2015 to 24.6 billion in December 2016.
A sector-wise analysis shows that NPLs are currently higher than the rate of 5 percent set by the Central Bank of Rwanda, which could have negative impacts on financial and economic stability.
The Central Bank estimates that assets of the financial sector continued to grow as it has seen banking sector assets increase by 11.5 percent (year –on-year) to Frw 24 trillion.
, John Rwangombwa, the Central Bank governor noted that BNR will continue to engage financial institutions to improve financial efficiency in order to improve financial sector profitability.
The Rwandan economy grew by 5.9 percent in 2016 and is expected to continue performing well in 2017Q1 as the real composite index of economic activities grew by 5.8 percent during the first two months of 2017 and total turnovers grew by 15.9 percent during the same period.
With regard to monetary aggregates, broad money increased by 07 percent between December 2016 and February 2017, against 1.1 percent recorded in the corresponding period of 2016. Credit to private sector expanded by 2.2 percent against 2.4 percent in the same period of 2016.
Total new authorized loans increased by 16.1 percent in the first two months of 2017 from 7.1 percent of the same period of 2016.