Sunday, June 29, 2014

Huge opportunities for lenders, says Bank of Kigali boss

Bank of Kigali has posted a 22 per cent increase in profit after tax in the first nine months of this year buoyed by a jump in interest income. Photo/FILE

Bank of Kigali has posted a 22 per cent increase in profit after tax in the first nine months of this year buoyed by a jump in interest income. Photo/FILE  NATION MEDIA GROUP
 
By Berna Namata
In Summary
  • The entry of new banks has certainly changed the banking landscape in Rwanda; it created more dynamism in the banking sector. Banks became more competitive, they started offering a wider variety of products, being more innovative and expanding their branch network.
  • According to the Finscope 2012 report on Rwanda, only 23 per cent on the Rwandan population is banked — which means there exist significant opportunities for providing financial services to the remaining 77 per cent of the population.

Bank of Kigali recently reported a net income of Rwf10.8 billion ($16.3 million) for the nine months ended September 30, 2013, which represents an increase of 22.0 per cent year on year.

In an exclusive interview with Rwanda Today’s Berna Namata towards the end of last year, the managing director of BK, James Gatera, speaks about the bank’s performance and the prospects of the local banking industry.
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What is driving profitability?
Our profitability has been driven by growth in interest income as a result of loan book growth and our investment in innovative products and services.
We have continued to increase our branch network and introduced agency banking and mobile banking. These channels, in addition to the number of products we have introduced in the market, make it possible for us to achieve our strategy.
We have also managed our operating expenses and maintain our cost-to-income ratio in the low 50s. This has allowed us to continually increase our net profit.
In addition, we have increased our non-interest income through fees and commissions as we roll out various technology-driven delivery channels.
Your balance sheet shows a slowdown in lending. Why is this so?
There has actually been a growth in the loan book, of 18 per cent, if you compare the loans we issued between September last year and this year. Approximately $30 million has been issued in credit to the private sector over the past one year.
Having said that, we do have significant loans in the pipeline which had been earmarked for disbursement in the third quarter but have since been slightly delayed by negotiations. For instance, the recent loan to Cimerwa was delayed due to a change in shareholding.
Limited sources of deposits has been a key challenge for the banking sector. For instance, there was a time when the few corporate bodies successfully negotiated higher deposit rates, which in turn made credit expensive for retail customers. To what extent has that issue been addressed?
Banks are addressing this issue.
Bank of Kigali has, for example, addressed this challenge by mobilising deposits from retail customers through branch network expansion and maintaining innovative products and services to our corporate customers.

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