African Business: What is your perspective on the outlook for the Bank of Kigali, and by extension, for Rwanda?
Diane Karusisi: As of September 2021, our assets have grown by more than 28% and our net loans have grown by 20%, reflecting demand from the private sector and showing the appetite to invest in the economy.
This correlates positively with the growth of GDP. We have seen a fantastic 2021 Q2 with growth of 20%, and growth of more than 10% in Q3. This year we expect to see double-digit GDP growth.
As Rwanda’s largest bank, this augurs well for us and future demand for our services. Rwanda showed its maturity in its handling of the Covid crisis. This has helped all sectors, and the Bank of Kigali is at the centre of all these developments, for the simple reason that all these sectors transact.
I believe 2022 will show clear recovery from the Covid-19 pandemic.
In which sectors of the economy are you seeing growth and which sectors have struggled?
Some sectors, such as hospitality, are still struggling due to travel restrictions and curfews. Public transport and the private companies that operate it are still down due to curfews and work-from-home policies. Luckily they have received support from the government in the form of subsidies and loan restructurings, which has kept them alive, and kept the country moving.
But when you look at trade flows, investment and manufacturing, we see significant growth, which shows how resilient our economy is. With the logistical constraints that come with our geography, and restrictions on trade in the past two years, we are seeing a good deal of import substitution in sectors like cement, the local demand for which is close to being met 100% by local supply, up from just 30% about four years ago.
The FMCG segment in particular is doing very well, with companies setting up small factories – many of them thanks to foreign investment – to meet demand for basic household items, which is helping us overcome our logistical import problems.
Furthermore, these companies are discovering export markets in places like DRC, which used to be a re-export market for Rwanda; this presents a huge opportunity to new Rwandan producers.
The government is offering incentives, like low energy costs and low taxes, to promote the development of manufacturing capabilities. The Bank of Kigali is growing on the back of these developments and we are seeing appetite from local investors.
And these are sectors that also produce a lot of jobs, which is going to create a virtuous cycle and have wider-reaching effects on the broader economy and the quality of life for ordinary Rwandans.
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What does the establishment of the Kigali International Financial Center (KIFC) mean for the Bank of Kigali and Rwanda’s plans to become a financial hub?
The government’s plan is to build a centre of financial innovation, excellence, and service provision at the heart of Africa. This plan rests on legal reforms to attract investment towards key areas such as green energy financing, private equity, fund management and fintech, concentrated in the KIFC.
These services can then be exported to other parts of Central and Southern Africa that do not have a lot of access to finance. The Bank of Kigali’s holding company is registered with the KIFC, where we have great financial incentives, such as group-level corporate income tax of 3%, as opposed to 30%.
We hope that this will allow us to attract more investors from various sectors to the Bank of Kigali and expand into more parts of the financial industry.
How does the Bank of Kigali tailor financial products to promote sustainable energy?
When you look at our energy portfolio, most of the producers that we finance are actually from the green space. Most are hydropower plants – usually small ones producing a couple of megawatts and some producing as much as 20 megawatts.
We see a possibility for us to refinance these loans with more affordable facilities. The green finance pool is quite big, and we are looking for opportunities to pass on incentives to our clients so that they can get better financing at affordable rates.
In general we need to improve our knowledge of the sector to better understand where the opportunities are, how green energy is certified, and what projects can attract financing – not only in Rwanda but in the region – to create a knowledge hub in Kigali to tap into these opportunities and allow our economies to grow in a sustainable manner.
Part of our CSR is supporting rural homes in getting solar panels installed for household use. The cost of connecting every home in Rwanda to the grid is huge, and some households consume very little power because they don’t use many appliances, so it doesn’t make business sense to connect all the households to the grid for the time being.
A transitional solution is having off-grid, small-scale solar capabilities installed on the roofs of rural family homes. Installation is not expensive and it is getting cheaper as it catches on, with economies of scale. The government’s target is 100% access to electricity and the quickest, most affordable way of reaching that in the short term is off-grid solar.
Are there enough large banks in Rwanda to finance big transformative transactions?
Before Covid we saw a new bank entering the market every year, such as Bank of Africa, from Morocco. So we have seen a lot of movement in the banking sector.
Fewer than 40% of Rwandan adults are banked at the moment, which presents a big opportunity. The ratio of banking assets to GDP in Rwanda is about 44%, which is quite low compared to other countries, where it can be as high as 200%.
Because we have a growing economy and have segments that are still excluded, banks are attracted to Rwanda.
We also have a stable regulatory environment, and the approach of the banking regulator, the Central Bank, is very collaborative. Whenever they want to try something new they first discuss it with the Bankers’ Association and agree on if, how, and when new regulations can be implemented.
So investors see many opportunities and feel comfortable operating in the regulatory framework that we have created in Rwanda.
How important is fintech to Rwanda’s future?
Fintech is very important in bridging the gap and making sure everyone is included in the financial system. But fintech offerings need to be meaningful by not only providing the means of transaction, but also by offering loans to grow businesses and protecting wealth from risk.
Fintech is helping us to do that on the back of close to 100% 4G internet coverage. Even if Rwandans do not all have internet access in their homes, all they need is a phone to be able to access financial services, whereas in the past we had to open a branch or have an agent in every part of the country.
So I see a lot of potential for collaboration between fintech companies and traditional banks, to offer people financial services that allow them to transact but also to grow small businesses.