The past 11 months have been good for the banking sector, which forms the largest part of Rwanda’s financial system; however, much more is expected of the sector in the coming year.

It was reported early this year that many people who start businesses that require large starting capital are compelled to start repaying the loans before the enterprises start earning. "This means the borrowers pay interest from their capital rather than revenues,” noted the vice governor, Monique Nsanzabaganwa, the vice-governor of the central bank, in an interview with The New Times this year.

The sector is closing the year with an estimated 11 commercial banks following the formation of BRD Commercial Bank a few months back, four microfinance banks, one development bank and one cooperative bank. The sector’s new authorised loans increased by 47.8 per cent in the first half of 2014, amounting to Rwf325.7 billion, up from a decline of 12.4 per cent recorded in the corresponding period last year, according to figures from the central bank. Of the total authorised loans, 42 per cent were short term, 28 per cent medium-term while 30 per cent were long term loans.

"The problem we have in the market is that there is a mismatch between resources and projects to finance.

"The projects to finance require more time to pay back loans while the resources we have allow us to lend mainly for short term periods,” said Rachid Muremangingo, the chief finance officer of Cogebanque.

Muremangingo said the gap makes banks shy away from issuing long-term loans in the market.

He added that with longer repayment periods, the interest rate had to increase factoring in the increased risks and bank expenses.

In May, when Rwanda hosted the African Development Bank Annual Meetings, many expected it to be used to woo some of the big continental investment banks to open office in the country or finance local banks to enable them finance long-term projects.

To date, no investment bank has yet set its sights on the Rwandan market, but some local banks have been able to secure external lines of credit or announced their willingness to finance projects that require long term finance in the country.

On the sidelines of the meeting, the Development Bank of Rwanda (BRD) signed a deal with the African Guarantee and Economic Co-operation Fund (FAGACE) and the Private Sector Federation which would see businesses access investment finance.

"The co-financing arrangement offers owners of medium and long-term investment projects attractive financial conditions such as low interest rates and financial security to enhance their credit worthiness,” said Alex Kanyankole, the BRD chief executive officer after the signing.

In July this year, Kenya’s regional financier, Equity Bank Group’s chief executive officer, James Mwangi was in the country to meet President Paul Kagame together with a 20-man delegation.

Mwangi said they would use their bigger East Africa group balance sheet in order to be able to do a single lending limit of up to $150 million (Rwf100.6 billion) to each venture which will be sufficient to support development of the country without loan syndication.

 With the developments, the financial experts believe 2015 will see more people receive long term financing at lower interest rates and better repayment terms.