South African President Jacob Zuma (left) and President Paul Kagame of Rwanda. FILE
By BERNA NAMATA The EastAfrican
In Summary
- With low inflation and increased liquidity in the market as government resumes spending, banks could lower their lending rates.
Rwandan borrowers are likely to benefit from
reduced lending rates in coming months, as commercial banks diversify
their sources of deposits.
With low inflation and increased liquidity in the market as government resumes spending, banks could lower their lending rates.
Rwandan commercial banks currently have higher
deposits after aggressively launching branchless or agency banking, and
expanding their branch networks to rural areas.
The banks are benefiting from reduced government
borrowing from the domestic market, as shown by falling interest rates
on Treasury bills to between 5.1 per cent for one-month instruments and
6.5 per cent for maturities of one year, from 12 per cent in April last
year.
Recent statistics show that lending rates by
commercial banks have remained almost unchanged at 16.83 per cent as of
March this year, in comparison to 16.9 per cent in December 2013.
Deposit rates dropped significantly from an average of 11.6 per cent in
June last year, to 8.58 per cent in March this year.
John Rwangombwa, the governor of National Bank of
Rwanda (BNR), says lending rates are likely to come down from April as
banks now have access to relatively cheaper deposits.
“When you look at the deposit rates, the biggest
financing source for the banks has gone down — there is a drop in their
cost of financing. Last year they were borrowing expensively to finance
their lending — this has gone down,” Mr Rwangombwa told The EastAfrican.
On Tuesday, the central bank kept its repo rate (lending rate) unchanged at seven per cent since June 2012.
Mr Rwangombwa said the delayed impact of changes
in the central bank’s policy, in particular on lending rates, is because
banks had a big stock of expensive deposits in their financing.
Credit to the private sector is expected to expand
to 15.8 per cent this year, from 12.9 per cent in 2013. Rwanda’s
inflation rate was at 3.45 per cent in February.
“There is a general expectation that the lending
rates will come down because of the prevailing macro-economic stability.
There has been marginal depreciation of the Rwandan franc, a rebound in
economic activity and there are signals that inflation will be kept
under control,” said Toroitich Maurice, the managing Director of Kenya
Commercial Bank Rwanda.
He said his bank plans to revise lending rates
downwards from next month. “Generally, the deposit rates are under 10
per cent — we should see the effect in the second half of the year.”
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