The number of Rwandans borrowing from commercial banks continues to increase but the figure remains low, with official statistics showing that only 421,000 received credit last year. This represents just 3.5 per cent of the population.
To put this in a context, this number is less than the population of Gasabo District, which is inhabited by about 500,000 people.
Rwanda has 30 districts.
Yet, even less people borrowed in 2018 - just 308,000, the figures from the Central Bank released on Tuesday show.
Outstanding loans issued by local commercial banks stood at Rwf2,084 billion at the end of 2019, but this figure includes credit extended to corporates.
According to Rwanda FinScope study released in 2017, only 26 per cent of Rwandans were formally banked. However, the same study put financial inclusion at 89 per cent. This means that more citizens accessed financial services through other platforms, instead of commercial banks.
Experts point out that limited borrowing from lenders has implications on people's ability to invest and acquire assets.
Bankers attribute the relative small number of people who seek loans to limited number of formally banked population. This, according to economic analysts, could partly explain why most major local banks focus on serving corporations as opposed to individuals.
The low lending rate could also reflect reluctance of banks to ease loan requirements, or lending procedures.
Bank of Kigali customers queue to get services at BK main branch. Emmanuel Kwizera.
The figure does not include Rwandans who borrowed from Microfinance institutions, including savings and credit cooperatives (Saccos). Loans totalling Rwf62 billion were issued via Saccos and other Microfinance Institutions.
Robin Bairstow, president, Rwanda Bankers Association, told The New Times noted that majority of Rwandans are served by Saccos and other MFIs, as well as other forms of informal lending mechanisms.
However, Bairstow, who is also the Managing Director of I&M Bank Rwanda, said the number could soon grow due to improvement in quality of data at the Credit Reference Bureau, greater experience of local banks, digitisation of banking services among other factors.
Improved quality data, he said, enhances chances of increasing unsecured loans.
This will particularly allow for banks to better understand income patterns of businesses and employees of SMEs thereby facilitating decision-making. Over the years this aspect has been improving. For instance, I&M Bank Rwanda can now lend up to 17.5 times one's salary without collateral thanks in part to improved data and Credit Reference Bureau's tracking system.
Peace Uwase, Director, Financial Stability at National Bank of Rwanda, told The New Times that digital solutions by banks and telcos will help drive up access to credit.
Micro-digital loans drove up access to credit last year, she said.
A total of Rwf25.41 billion was disbursed in digital loans in 2019 alone. Digital loans are characterised by shorter processing time, fewer requirements and are more convenient for low income households as opposed to conventional loans.
Digital loans are used for the purposes of both investment and consumption.
Most Rwandans who spoke to The New Times about borrowing said they have never sought a bank loan because they consider themselves ineligible.
They blamed this on the fact that they work in the informal sector, which does not allow for commercial banks to access important details about their financial status thereby making it difficult for lenders to ascertain their repayment capacity.
Others blamed it on lack of collateral, while some said they preferred to work Microfinance Institutions because their services are more tailored to their needs.
Samuel Kamugisha, Director-General of Industry and Entrepreneurship Development at the Ministry of Trade and Industry, said there is need to explore alternative sources of funding, especially for start-ups, who are often not a target for local banks.
Other people are believed to be reluctant to take out a loan because of high interest rates, which average 16.47 per cent among local commercial banks.