The Independent (Kampala)

17 February 2013

Rwanda: Bank of Kigali Dives Into Regional Waters

Bank of Kigali (BK), Rwanda's largest commercial bank in terms of assets, has started 2013 with bigger intentions one of them being to establish a physical presence in other east African countries.

In January, BK finally opened a representative office in Kenya's capital Nairobi a move the bank's senior officials describe as a 'curtain raiser' for bigger things to come.

Sarah Kirenga, BK's public relations officer told The Independent recently that the representative office, located at the Africa Capitol Hill Square on Upper Hill, will mainly identify business opportunities in the market and research to ascertain information regarding the market, product demand, and price expectation.

"It will proactively engage with different stakeholders hence building a strong working relationship while creating a conducive business environment for Bank of Kigali," explained Kirenga. The officials at Rwanda's only listed Bank explained that with a physical office in place, they expect to initiate marketing visits to financial institutions in Kenya aimed at promoting BK in light with the ongoing economic booms within the member states of the East African Community. They hope this will enable it to channel business to Head Office in Kigali.

"We are planning to make our presence felt everywhere possible," said Lawson Naibo, BK's Head of Operations.

Following years of creating a strong local brand whose positive outlook has enabled the institution to claim the lion's share of the financial sector in Rwanda, BK feels it can now spread local success into the region where it was voted the best East African Bank 2012 at the sixth Annual African Banker awards.

As a country, Rwanda earned respect of its peers for maintaining a stable economy with the lowest levels of inflation in the region as well as minimal cases of corruption which has helped increase investor confidence as seen by a surge in both local and international investment proposals over the years.

Last year, the country attracted investment proposals worth US$1.13 billion a development which sets in high business prospects for banks as they will be needed for capital financing.

According to John Bugunya, BK's Chief Financial Officer the bank has the capacity to finance huge projects following a clever strategy where the bank has obtained long term funding lines to meet its credit expectations to the public. The National Bank of Rwanda (BNR) regulations demand that the maximum a bank can lend out to a single borrower is 25% of a bank's total capital. For BK's case, that would amount to US$25million according to Bugunya.

With a plan to advance the representative office into a branch at a later stage, BK will become Rwanda's major 'investment export' a trend which continues to be dominated by Kenyan firms. Kenya is home to two of the biggest financial institutions in the region--- KCB and Equity bank--- both of which entered the Rwandan market a development that was widely expected to check BK's dominance. "Despite the entry of competitors, we have demonstrated our strength by growing and consolidating our market share over the last 5 years," said Bugubya.

He revealed that BK assets have doubled from US$ 225.1million to US$ 476.3million, net loans grown from US$ 89.4million to US$ 203.7million, client deposits have risen from US$ 187.2million to US$ 299.5million and shareholders' equity from US$ 23.5million to US$ 101.9million in 2011. He added that the Bank has increased its customers from 27,000 to over 100,000 while also increasing branches from 11 to 56.

This success is also reflected on the stock market with a steady demand for the Bank's shares where at least Rwf19billion (more than US$30million) has been realised since the Bank's IPO in September 2011.

Markets' analysts suggest that a physical presence in Kenya coupled with the Rwanda's attractive investment environment might woo big investors into the Bank.

It also comes at a time when Kenya is going for a highly volatile presidential election that has provoked memories of the 2007 post election violence that caused a lot of losses through looting and vandalism.

"It's valid to worry if you have investments in Kenya because you can't predict what the situation will be like after the polls; violence could mean heavy losses which calls for pro-active moves by investors to shield their capital," reasons Austin Karamagi a private investment consultant in Kigali. Reports from Kenya already indicate a rise in insurance cover by various investors while others have reduced volumes of goods passing via the Mombasa port opting for the problematic Dar-es-laam port as Election Day nears.

It's in the same reasoning that financial commentators predict a move to transfer capital to safer and more stable economies by investors to avoid falling prey.

But besides Kenya, BK is also pondering a move to other neighboring states in the region and Uganda seems to be next in queue.

"The bank is carrying out different studies to examine when and how it should start operating in other regional branches like Kampala, Uganda," revealed another top bank official.

BK's delay to set foot in the neighborhood has been attributed to unfriendly investment regulations.

In Tanzania, members of the Rwandan private sector have rued over a policy that requires regional investors to co-own investments with a local citizen who must have majority stake.

In Uganda, despite being a regional bank hence local under the EAC frame work, BK would be required to meet the same standards that are set for international banks entering Uganda. Such factors have kept the Rwandan financial powerhouse limited to the home ground.

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