Rwanda: I&M Bank Cuts Base Lending Rate to Reduce Clients' Loan Burden

I&M Bank Rwanda clients are set to have some relief on their loan repayment burden as the lender has reduced its base lending rate from 16.5 per cent to 16 per cent.

Base lending rate is initial interest rates that a lender has internally before setting the commercial interest rate for credit.

This is often determined by factors such as how much it cost how to borrow the funds disbursed as loans.

A lower base rate allows a commercial bank to lend at reduced rates consequently allowing for more affordable loan products for customers.

By reducing the base rate, the bank will be consequently reducing their revenue which I&M Bank Rwanda said is bearable as they seek to support their customers amid the novel Coronavirus crisis.

The crisis and interventions against it such as lockdowns have affected a majority of supply chains as well as consumption in the economy.

This has, in turn, led to reduced earnings and consequently ability to pay back loans for some clients.

Robin Bairstow the Managing Director of I&M Bank Rwanda said that the decision was taken after review and consideration by the executive and the board on ways to further support customers and their businesses during the post-COVID-19 recovery period.

Bairstow said that the reduction will apply to those currently servicing loans and those who will borrow in coming days.

While the move is going to eat into the bank's move, Bairstow said that economic welfare of their clients takes priority in light of the crisis.

The move is expected to cost the bank between Rwf80 million and Rwf100 million in the initial months.

Explaining the extent of relief, the bank said that for instance, for a client currently paying a mortgage of Rwf50 million, the reduction will see the repayment burden reduced by about Rwf19,000 per month.

With the move expected to be a relief for SMEs currently servicing loans or planning on borrowing, Bairstow said that the bank is keen on facilitating business recovery owing to its role in contributing to Gross Domestic Product and employment creation.

"SMEs account for a majority of businesses in Rwanda and contribute about half of Rwanda's Gross Domestic Product as well as employment. Aware of their role in the economy, I&M Bank Rwanda's intervention seeks to improve their position to recover and bounce back," he said.

This is one of the interventions of the bank to its clients amid the novel Coronavirus containment period.

The bank also committed to offering a grace period of up to 3 months for principal and/or interest payments in support of those businesses or our retail clients' who are being financially affected by the pandemic.

This is with an understanding that a majority of their clients' cash flows have been interrupted by the pandemic and could have liquidity challenges in the short term.

According to the bank's financial position statement, the lender has over Rwf170 billion in loans and advances to customers.

The new base lending rate takes effect on 15th of April as they take the long weekend to align their systems for implementation of the development.

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