After being negatively affected by the 1994 Tutsi genocide, Rwanda’s banking sector is gaining momentum, thanks to government efforts to liberalise and deregulate the financial sector.

Many bank debtors died in the holocaust while others fled the country, which caused enormous bad debts on the banks’ balance sheets.

This left banks in a tight situation to operate, leading to inefficiencies and limited bank services in the country.

But just after a few years when government introduced the Financial Sector Development Program (FSDP), combined with efforts to attract private capital inflows, more banks have been admitted into the Rwandan market and competition for market share is intensifying.

Whereas it is true that when elephants fight the grass suffers, this may not apply in business because, as businesses battle for customers, it usually results into improved and flexible services. 

This is starting to manifest itself in Rwanda’s banking industry after the presence of foreign institutions like Ecobank, Actis, Fina bank, RABO bank, Access, Shorecap International, Africainvest and Belgium Investment Company (BIO) and of recent Kenya Commercial Bank.

And if it wasn’t the meltdown in the global financial sector, Barclays’ takeover of Banque de Kigali would have been sealed by now.

Of the eight indigenous commercial banks in the country, only Banque de Kigali has no foreign influence.

These banks have come with much expertise and services especially in retail banking.

They are continuously opening the way for a wider range greater choice in services and products to customers.

New products like mortgage financing, leasing, SMEs fiancing, internet banking and Short Message Service (SMS) banking are a result of the increasing fierce competition in the market environment.

Currently commercial banks account for 75 percent of the total deposits and loans, but claims only 10 percent of the total customers, Banque populaire excluded.

Combined branch network of the seven commercial banks in the country excluding Banque Populaire Du Rwanda, was only 38 in 2005, it has since grown to over 173 with the transformation of Baque populaire as a commercial bank.

Competition is forcing these financial institutions to extensively roll out their branch network to rural areas which are dominated by Micro Finance Institutions (MFIs).

Indeed MFIs are supposed to bridge this gap, but lack of sound financial statements, weak internal controls, inadequate financial management systems and poor governance structures, culminated into the closure of some of them the recent past. 

The number of deposit accounts operated by commercial banking system in the country increased is 765.945 as of June this year.

This represents roughly 17 percent of Rwanda’s adult population.

According to statistics from Simtel, the use of Automated Teller Machines cards is increasing significantly.

Clients using the ATM cards have increased from 21,099 people in September last year to 33,722 in August this year.

To develop a stable and strong financial sector, particularly the banking industry, and promote economic growth, the country requires appropriate macroeconomic framework.

It also requires a good regulatory and supervisory environment.

But stringent supervision and regulation could undermine competition which would kill innovation

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