Rwanda’s bad loans go down, new loans expected to boost economy

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The financial sector recorded a reduction in nonperforming loans-NPLs in the first half of 2015, the reduction of non-performing loans is a positive indicator which will help boost the economy.

According to central Bank, the sector’s bad loans reduced to 5.9 percent by June 2015 down from 6.6 percent thus improving asset quality of the industry that is being encouraged lend to the private sector.

This saw the bank’s balance sheet remaining strong with total assets increasing by 13.1 percent between June 2014 and June 2015.

Of these total assets, Rwf 2.0 trillion were in form of loans to private sector and investments in financial securities which amounted for 57.5 percent and 13.5 percent of total assets respectively.

“From stability perspective, the sector is sound and resilient to shocks as it remains well capitalized, profitable and liquid,” said John Rwangombwa, governor of the Central bank said during the presentation of monetary statement and stability report last week.

Indeed, the sector’s profitability increased with net profit after tax rising by 36.5 percent to Rwf 23.60 billion by end of June 2015 up from Rwf 17.29 billion in the same period in 2014.

But borrowers still urge that the interest rates levied by banks is still high which fetches their ability to access credit for business.

Accordingly, the interest rates for the financial sector ranges from 16 percent to up to 22 percent for microfinance institutions.

“Banks are business just like other business, capital is very intensive ingredient in the banking business,” said Morris Torotich, managing Director of Kenyan commercial Bank in an interview with this website.

He adds that risk of default, poor savings culture contribute to higher interest rates in the financial sector.

 

 

 

About the author

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.

More posts by | Visit the site of Ndaka

 

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