Exploration and mining activities in Rwanda remain inadequately funded, despite continuous efforts by Government to showcase the sector's potential.
New National Bank of Rwanda (BNR) statistics show that the mining sector continues to receive the smallest share of loans from the banking system.
The sector received 0.1 per cent in 2016 and 0.2 per cent both in 2017 and 2018. That reflects a low level of willingness of the traditional lenders to invest in a sector that the country places much of its hope.
"Until now, accessing loans for mining operations from financial institutions in Rwanda remains a big problem. Banks require detailed exploration studies, which in real sense, are costly," says Jean Marie-Vianney Faida, who owns Blue Change Mining Ltd, a local company engaged in mining business.
Faida adds that the continued failure to access finance hinders the progress of the mining sector as players like him continue to engage is subsistence mining which does not bring in higher value as opposed to large scale operations.
"What we are doing currently is small scale mining using tools like spades, hammers. If we had financial capacity, we would invest in modern machinery because that brings in more value," he says.
Francis Gatare, the Chief Executive Officer of Rwanda Mines, Petroleum and Gas Board (RMB) admits that the financing gap is indeed big, disclosing that less than 30 per cent of the companies operating in the country's mining sector are doing professional exploration activities.
"This means that the majority of operating companies are unable to access the kind of capital required for them to engage in professional exploration," he says.
This is because exploration is risky, medium term, does not provide immediate returns and it is a sector that some few places have been able to perfect.
As a country which is emerging in the mining sector, Gatare states that the Government has embarked on raising awareness about the importance of exploration.
"We find that exploration is critical in raising operational efficiencies. When you look at a sector that continues to be dominated by small and medium companies, it demonstrates the deficit in exploration because that's what determines the transition from to more larger professional companies," he notes.
But a banker like Andrew Kulayige describes "exploration as more of a speculation", highlighting that a commercial bank cannot risk investing in such an activity they are not sure about its end process.
"Someone to invest in a speculative investment has to have guarantee of the repayment ability in case the speculation doesn't come out as expected," he says.
However, Kulayige who is the head of Commercial at Equity Bank insists that banks were willing and ready to invest in mining activities provided that there was guarantee.
His own bank has, as of today, loan requests from mining companies worth US$17 million, and that the target was to make sure that 7 per cent of Equity Bank's loans go to the sector by the end of this financial year.
The country is investing significant efforts to turn the mining sector into a vibrant, dynamic and efficient industry that is able to contribute a big share to the country's growing economy.
However, continued lack of access to required capital could slow down the efforts aimed at achieving these targets.
Dylan McFarlene, a mining engineer based in the United Kingdom, notes that traditional funders cannot finance exploration activities, rather equity investors look out for such investment opportunities.
Currently, much of the funding for exploration activities comes from traditional big equity markets like Canada, Australia and UK and that money flows to countries that have higher value minerals like gold, uranium, silver, lithium, and copper, among others.
That is according to S&P Global Market Intelligence.
Most of these minerals are produced on small scale, putting Rwanda on a disadvantage to attract such investments.
In fact, McFarlene argues that while Rwanda could be competitive in producing 3T's (tin, tantalum, tungsten), the market for a product like tantalum is significantly small compared to what investors are investing in.
"You are talking about hundreds of billions versus tens of billions," the expert says.
Gatare too agrees that "exploration is typically not financed through debt" as the risk profile of the operational nature of exploration is very high and as a result, it is difficult for banks to finance the sector.
However, banks are willing and prepared to finance mining operations especially when there is sufficient exploration data available.
"When we look at where to target our mobilisation efforts for exploration finance, it's not going to be banks. Where we are looking at are equity investors, attracting companies that focus exclusively on exploration," he says.
Gatare also indicates that they are also looking at partnerships to attract international exploration companies which are able to bring in equity.
The last approach, according to Gatare, was through consolidation of areas with high potential for large scale mining from areas that have low potential for mining.
"We are doing this because in the past we have had artisanal and small scale miners going into areas that are highly mineralised."