High interest rates for bank loans and the recently increased insurance premiums on cars were among top concerns that MPs shared with the Central Bank Governor John Rwangombwa on Thursday as he presented the bank’s 2017-2018 report to Parliament.

They called for the bank to look into the two issues in order to keep Rwandans in business as they work to develop themselves and grow the economy.

On average, clients pay between 16 and 18 per cent in annual interest rates on loans from commercial banks in Rwanda, while they pay about 24 per cent to get loans from local Savings and Credit Cooperatives (Umurenge-SACCOs).

The rates are too high to positively drive economic activity and the central bank should do something to reverse the situation, several MPs argued.

Senator Perrine Mukankusi urged the bank to do something to reduce interest rates at which people in Rwanda acquire loans, explaining that with the current rate at which they borrow, risks of non-performing loans will persist.

"We need to look at the consequences from having high interest rates in the country. Something needs to be done to reduce non-performing loans but I think the fact that interest rates are high is also playing a role in the problem of non-performing loans,” she said.

She suggested that as banks report profits they make every year, citizens should benefit from the banks’ profits by accessing cheaper loans.

But with banks in Rwanda making slightly over 9 per cent of their capital in profits every year, Rwangombwa said that the cost at which banks acquire funds to lend to people remains high.

He encouraged Rwandans to save more if they are to access loans at lower interest rates in the future and to also adopt the habit of paying back their loans in order to boost their credit worthiness.

"The biggest challenge is non-performing loans because they drive high the risk at which banks provide loans,” he said.

The governor urged Rwandans to keep their money longer in the banks to enable them to give long-term loans at more affordable interest rates.

"We need to sensitise people about saving,” he said, explaining that lack of savings makes it difficult for banks to issue long-term loans.

At the parliamentary session yesterday, which brought together both deputies and senators, another major concern for MPs was the fact that many Rwandans find the current car insurance prices extremely high.

MP Pierre Claver Rwaka said that a coaster bus whose comprehensive insurance used to cost Rwf2 million is now at Rwf4 million.

"We need to reorganise the insurance sector,” he told the governor.

In January this year, insurance companies unanimously announced an increment of up to 70 per cent for mandatory motor third-party insurance premiums.

The decision drew public outcry with many describing the insurers as a cartel that took the decision without enough consultations with key stakeholders.

MP Jean-Damascène Murara said at yesterday’s session that the central bank should try and tailor prices for car insurance to car owners’ means.

"Insurance prices were raised promptly without enough consultations with the public. Are insurance prices tailored to people’s means?” he asked the governor.

Rwangombwa defended insurance companies, explaining that the decision to raise their premiums was made after they had been losing money and were on the brink of closing their business.

"From 2013 to 2017, insurance companies were making losses. You would be, you can’t stay in business while losing money. Reports from insurance companies that we receive today indicate that even with the new rates, they are yet to make profits. Raise of car insurance prices is not about has nothing to do with insurance companies’ greed,” Rwangombwa said.

After public outcry over an increment of up to 70 per cent for mandatory motor third-party insurance premiums, the government and the association of insurers in Rwanda (ASSAR) agreed that the raise would be implemented in two phases beginning with 60 per cent increment and then 40 per cent.

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