The Independent (Kampala)

Rwanda: More Optimism From Bank of Kigali

Bank of Kigali, Rwanda's biggest commercial bank with a market share of 35% is readying for its Annual General Meeting scheduled for May 29. Rwanda's only indigenous bank, which is listed on the stock exchange, plans to pay out Rwf 7.4 billion in dividends. The Independent's correspondent spoke to John Bugunya, the chief finance officer of the bank.

Last year was not generally very good for the banking industry. We saw the ratio of non-performing loans go up and contraction in lending. From your own perspective, why did things go wrong?

I believe the central bank might be in a much better position to respond to the banking industry developments. For Bank of Kigali, while there was a moderate increase in our non-performing loans to 6.9% in 2013 from 6.5% in 2012, we are confident that this trend will reverse in the short term due to our robust relationship and risk management strategies.

What is your projection for 2014 and beyond?

Our expectation is that 2014 will be an equally good or even better year than 2013 for BK as we see improvement in liquidity, increasing demand for credit, and an upward trajectory in economic activities.

New players are coming. For example Crane Bank from Uganda has been licensed. It is known for being strong in retail products--that appear to Bank of Kigali's 'milk cow.' Is there need to tighten your belt?

We welcome the new players into the banking sector. As partners, we believe that we can collectively contribute positively towards deepening the penetration of financial services. We don't therefore perceive the new entrants as competitors because we believe there are vast opportunities for all the banks given the level of unbanked population and the low proportion of banking assets to GDP. That said; it's important to note that over the last five years, we have year-on-year consistently grown our market share of total assets from 26% in 2009 to over 35% in 2013 despite the entry of several banks. We are therefore confident that we will continue to consolidate our market dominance.

With more outlets opened in the past two years (including mobile vans, points of sale and agents) customer numbers are going up and so are deposits.

What are the projections in terms of revenue, customer numbers, and profits in this year and the next five years?

Our outlook for 2014 is very optimistic. We intend to continue creating value for our shareholders through higher returns on their investment as BK consolidates its leading market position.

What factors will spur growth this year and beyond that inform your optimism?

We believe that our growth in the medium term will be driven by the growing number of customers joining BK and our ability to cross sell products and services that add real value to our customers.

Figures show that new initiatives such as agency banking mobilised quite a good amount of deposits as they facilitated opening of new accounts. However, is there evidence to show that this is coming from new customers--people who previously did not have access to banking services?

Our investment in branches and agents has been targeting locations with limited or no access to financial services. Our presence in those locations has thus been a catalyst for economic development with several new accounts opened and high uptake for credit.

What is the real story of lending rates in Rwanda? The private sector/borrowers say the rates are very high. You, the lenders, say that in order to stay in business that is the lowest you can offer. How does Rwandan situation compare with other markets in the region like Uganda, Kenya or Tanzania? And is there a peculiar situation keeping interest rates high in Rwanda--beyond market expectations?

Interest rates are driven by various market forces such as cost of funds, inflation, and credit risk among others. In reference to your question how the Rwandan interest rates compare within the EAC, I believe the central bank will be in a better position to respond to this aspect.

As a company listed on the stock exchange, what should shareholders expect by the end of this year?

We are having the Annual General Meeting on May 29 in which the shareholders will review and if approved, receive dividends amounting to Rwf 7.4 billion (about $ 11.1 million using an exchange rate of RwF 670.2). This translates into an annual dividend of Rwanda francs 11.0 or approximately 3.36% dividend yield based on the share price of Rwf 330.

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