Customers wait to be served at BPR headquaters. The number of borrowers
from Rwandan commercial banks has dropped, as customers migrate to
microfinance institutions to avoid the former’s stringent credit
conditions. PHOTO | CYRIL NDEGEYA | NATION
The number of borrowers from Rwandan commercial banks has
dropped, as customers migrate to microfinance institutions to avoid the
former’s stringent credit conditions.
Data from the
National Bank of Rwanda (BNR) shows that the number of bank borrowers
declined by 12.5 per cent to 261,871 in June 2017, from 299,498 in the
same period last year.
On the other hand, loan accounts
in the microfinance sector reported a 17.5 per cent growth to 222,900,
boosted by the presence of the institutions in rural areas.
BNR
had attributed the decline in lending to weak demand, but the increase
in micro-lending indicates a growing credit appetite in the market.
“This
decline reflects an overall slowdown of the economy, which triggered a
reduction in the number of borrowers and the amounts borrowed in 2016
and in the first half of 2017,” said BNR in its annual report.
The August presidential election and a tough global economic environment were blamed for the slow credit expansion.
Bad
loans, which increased to over 8 per cent, also forced commercial banks
to adopt a conservative lending approach as they worked on cleaning up
their books.
The tightening of credit appraisal is
believed to have pushed potential borrowers to microlenders, whose
conditions are more lax, although their credit is more expensive than
commercial banks, said BNR.
But their lax stance has
been blamed for loan defaults rising to 12.3 per cent. Microfinance
institutions reported losses of Rwf3.6 billion ($4.3 million) as at June
this year.
But banks reported a 14.3 per cent loan
book growth, indicating that those who qualified for credit were
receiving large-ticket loans.
Rwandan banks lent out
Rwf1.5 trillion ($1.8 billion) in the period under review, compared with
Rwf138 billion ($161.4 million) disbursed by the microlenders. This
means that most of those who borrow from MFIs usually seek small
amounts.
Rwanda’s credit market has been dominated by
the informal market, with formal credit services accounting for just 15
per cent. The market trusts the formal institutions more when it comes
to safekeeping, as 49 per cent of deposits are with regulated financial
service providers.
The demand for other banking
services remained high, and deposit accounts increased to 1,871,858 in
June, from 1,736,203 last year.
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