columnBy Mansur Kakimba
Kigali — The recent move by the National Bank of Rwanda (NBR) to grant Banque Populaire: the citizens' bank (Banki Y'abaturage) a license to operate as a commercial bank has triggered serious worries among its competitors.
Previously, the bank faced restrictions in rolling out some products because it was not a commercial bank but a micro finance institution (MFI). NBR however leveled the playing ground and granted the bank commercial status.
We are yet to witness competition at its best.
Whereas other commercial banks are still struggling to bring their services closer to their clients, the bank has the widest network in Rwanda with 130 branches countrywide.
Its wide coverage is due to government's financial support in a bid to extend affordable banking services to as many Rwandans as possible, especially the rural folks.
Bank "Populaire" did not find it very difficult to spread all over Rwanda. The bank opened even in the remotest parts of Rwanda; regardless of whether there was electricity or adequate security.
The name: "Banki Y'abaturage" also attracted the masses to the bank because it evoked a sense of ownership of the bank. Rwandans felt like they owned the bank; they viewed and perceived it as truly theirs. The National Bank now reports that the Bank boasts approximately 600,000 account holders.
Besides, there's an interesting rationale about how Bank Populaire accumulates high liquidity that enables it lend at reasonable interest rates; causing a lot of alarm among its competitors.
Economic analysts say there is considerably low circulation of money in rural areas, especially during off (agricultural) season compared to urban areas.
Most rural Rwandans deposit much more than they actually withdraw. What I have realised, Bank Populaire is not sensitizing Rwandans enough on how they can use their deposit to accumulate more wealth through accessing business loans.
In this way, Bank Populaire accumulates a considerable number of deposits which translate into high liquidity. The higher the liquidity, the lower the cost of lending.
As an MFI, the Bank reportedly competed favourably with commercial banks and the Development bank of Rwanda (BRD) in lending on long-term.
This was because it had enough liquidity. NBR recently increased the minimum capital requirement for commercial banks to Rwf Five billion. Bank Populaire easily met this requirement.
Worries though have continued to loom among commercial banks following the issuance of a commercial license to Bank Populaire.
Just after a few months, during the 11th Rwanda International Trade Fair (RITF), held last August, the bank scooped "Best Financial Services" award; beating all the renowned giants in the banking sector.
As if this wasn't enough, the bank re-branded and came up with a new logo-trying to communicate the fundamental change in the banking sector.
To make it even "hotter", the bank penetrated the market with a provoking advert depicting a map of Rwanda showing branches spread all over the country with a smiling lady saying "Are you with us?"
What is even more interesting is that heads of some recently privatized banks have openly said that commercializing Bank Populaire has already disorganized the market.
This came at a time when some commercial banks had actually issued bonds on Rwanda's capital market. Investors are now skeptical about the profitability of such bonds on offer in the future.
Things are not adding up!! Another fear on the streets of Kigali is that commercializing Bank Populaire may scare off some prospective buyers of financial institutions on offer for privatisation.
Investors in the banking sector need a leveled playing ground. Some claim that competing with Bank Populaire is not fair.
There are however a number of issues the bank has to work on to maintain its big clientele. It may surprise one to note that Bank Populaire's branches are not networked.
An account holder in Gikondo branch still cannot access their account at the Kicukiro branch. In this day and age of interconnectivity and convenience, this hiccup is bound to cause customer dissatisfaction.
Rabobank, a Dutch Bank, acquired 35 per cent shareholding of Bank Populaire in June this year.