30 June 2017

Rwanda: Private Sector Welcomes Afreximbank Support

Photo: The New Times
Smale-scale traders at the Rubavu-Goma border post transact business (file photo).

The local private sector is upbeat following an announcement by African Export-Import Bank (Afreximbank) to inject about $500 million into the economy.

Private sector players say that the investment could help them expand their penetration into the regional market, as well as boost initiatives such as the Made-in-Rwanda campaign.

During the ongoing Afreximbank Annual General Meeting in Kigali, the bank's president said that they are currently in negotiations with the government on the disbursement of the funds.

Stephen Ruzibiza, the Chief Executive Officer of the Private Sector Federation, told The New Times that such financing to Rwanda is timely.

He added that, previously, a large section of the private sector was unaware of the existence of such financing that supports trade development.

"What has been missing is the knowledge of the existence of such funds. There are bankable projects and more competitiveness, thanks to initiatives such as Made-in-Rwanda.

"Some producers are going into high end production and large scale production. This requires cheaper or more affordable money," he said.

The Made-in-Rwanda campaign is geared towards boosting local production and reducing of imports.

As a multilateral financier, the bank's terms of financing are better compared to other models. The financing rarely considers collateral as commercial banks do which makes it easier to finance bankable projects that may not have much assets.

"Any other bank will look at collateral; this is a big bank that may not ask for physical assets. It will depend on the business, and potential market," Ruzibiza observed.

He commended the government's move to be part of the bank as well as creating an ideal operating environment.

"The application was one of the first things that we did right while market linkages is another positive step that has been taken, creating an enabling environment and hosting events such as the bank's AGM in the country," the PSF chief said.

Going forward, Ruzibiza said that the organisation's members will take steps such as establishing partnerships which will give them access larger markets.

Bankers' perspective

Bankers say that the use of finances for maximum impact is largely dependent on the private sector's appetite for the funds as well as the terms and conditions of the financing.

According to Maurice Toroitich, the Managing Director at KCB Bank Rwanda, the demand end of the chain is crucial in determining viability.

"As a trade financing institution that is willing to provide finance to the local market, I think the way to put it is up to the demand side that is important.

It is up to the market to have enough business to have demand for the facilities that Afreximbank is extending. It depends on the appetite of the business. Banking appetite is driven by business appetite," Toroitich said.

He added that local banks are likely to evaluate the terms and conditions of the Pan-African lender to see the possible options of partnerships.

"It depends on the details of the financing, cheap or expensive, it depends on what is possible with the terms. Each bank will be looking at the details of the terms and conditions to make sure that they make sense to their business," Toroitich said.

Beyond the credit line option that Afreximbank has often used in the country, Toroitich said that options such as co-financing and financing in local currency would also be ideal for the economy.

"Development finance institutions that put money into the country in foreign currency make it a bit difficult," the KCB Rwanda MD added.

At the moment, among the areas that exhibit big demand for the such funding, he said, are mostly energy and infrastructure.

"The big projects they are looking at are energy and infrastructure, where the demand is big. There is yet to be strong demand in production, agriculture and manufacturing," he noted.

The Afreximbank's Annual General Meeting brings together senior government officials, CEOs from around the world, renowned academics, private sector practitioners, and leading industrialists.

Participants are deliberating on how African countries can strategically invest in trade to boost intra-African trade so as to promote economic development, sustainably.

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