Rwanda banks faulted for high interest rates
By BERNA NAMATA The EastAfrican
Posted Saturday, February 15 2014 at 12:08
In Summary
At the central bank's presentation of its monetary policy and
financial stability statement, Rwanda's largest commercial banks were
accused of charging the highest rates on loans and paying the least
return on deposits.
While the central bank cannot impose or control interest rates charged
by banks, Mr Rwangombwa said the institution plans to roll out
extensive public awareness campaigns to assist borrowers to negotiate
for better rates.
The bankers maintain that their charges are relatively lower compared
with the region's, which remain on average above 18 per cent.
Rwandan banks are facing fresh criticism from the regulator for
charging relatively high interest rates, stifling credit growth.
At the central bank's presentation of its monetary policy and
financial stability statement, Rwanda's largest commercial banks were
accused of charging the highest rates on loans and paying the least
return on deposits.
Fresh data released by the National Bank of Rwanda last week shows
that industry lending rates declined marginally from 17.8 per cent in
September to 16.9 per cent in December 2013, despite the central bank
reducing its policy rates to increase liquidity and create room for
banks to lend to the private sector.
The central bank has kept its repo rate — its lending rate — unchanged
at seven per cent since June last year. The country's lending rates
are relatively low compared with the regional average.
Latest data show that Kenyan banks' lending rates averaging 16 per
cent; Uganda 24 per cent and Burundi 20 per cent, which banks in
Tanzania are charging at least 21 per cent.
READ: Reprieve? CBK team to probe high interest rates
While deposit rates offered by Rwanda's commercial banks dropped
significantly from an average of 11.6 per cent in June to 8.6 per cent
in December last year, major commercial banks continue to price their
loans higher than their smaller competitors and pay the lowest
interest rate to those who save with them.
Apart from limited though increasing competition, the central bank
attributes the rigidities in lending rates to the industry's operating
costs, which represent 76.7 per cent of total interest income on
average in 2012-2013 and high provisions for bad loans.
The result has been a widening interest rate spread that increased
from 6.5 per cent in December 2012 to 8.3 per cent in December 2013,
according to the central bank.
ALSO READ: Huge opportunities for lenders, says Bank of Kigali boss
No control
While the central bank cannot impose or control interest rates charged
by banks, Mr Rwangombwa said the institution plans to roll out
extensive public awareness campaigns to assist borrowers to negotiate
for better rates.
"We do not set the interest rates of commercial banks — but when we
engage them, we always come back to the pricing of their loans," said
Mr Rwangombwa, adding that higher interest rates have an implication
on the loan portfolios of banks.
"At the end of the day, that is partly linked to the increase in
non-performing loans," he said.
The industry's non- performing ratio rose to 7.0 per cent at the end
of 2013, compared with 6.0 per cent at the end of December 2012.
The bankers maintain that their charges are relatively lower compared
with the region's, which remain on average above 18 per cent.
They blame structural issues in the economy such as the country's low
level of savings, which limits their source of deposits.
"The reality is people who own banks want to make money. We also want
to drive down interest rates because it is in our best interest but we
also need people to save," said James Gatera, the managing director of
Bank of Kigali, the country's biggest local bank.
Mr Gatera pointed out that the industry's current average return on
equity of 7.3 per cent is still low in comparison with their
counterparts in the region. For example, in Kenya, return on equity
for banks is around 30 per cent.
The industry's consolidated balance sheet measured by changes in total
assets, grew by 21.0 per cent to Rwf1,509 billion ($2.2 million) end
of December 2013 from Rwf1.247 billion ($1.8 million) end of December
2012, largely driven by gross loans to the private sector.
http://www.theeastafrican.co.ke/business/Rwanda-banks-faulted-for-high-interest-rates/-/2560/2207670/-/128ocenz/-/index.html
--
SIBOMANA Jean Bosco
Google+: https://plus.google.com/110493390983174363421/posts
YouTube Channel: http://www.youtube.com/playlist?list=PL9B4024D0AE764F3D
http://www.youtube.com/user/sibomanaxyz999
***Online Time:15H30-20H30, heure de Montréal.***Fuseau horaire
domestique: heure normale de la côte Est des Etats-Unis et Canada
(GMT-05:00)***
| Reply via web post | Reply to sender | Reply to group | Start a New Topic | Messages in this topic (1) |
.To post a message: RwandaLibre@yahoogroups.com; .To join: RwandaLibre-subscribe@yahoogroups.com; .To unsubscribe from this group,send an email to:
RwandaLibre-unsubscribe@yahoogroups.com
_____________________________________________________
More news: http://amakurunamateka.blogspot.co.uk/; http://ikangurambaga.blogspot.co.uk/
--------------------------------------------------------------------------
No comments:
Post a Comment