Banks continue to dominate the financial sector in Rwanda, controlling 67.5 per cent of the total sector assets, the latest economic outlook report by the National Bank of Rwanda (BNR) has shown.

According to the recent Monetary Policy and Financial Stability Statement (MPFSS), the financial sector assets grew by 20.8 per cent in the first half of 2024, exceeding the five-year average of 18 per cent.

According to the central bank Governor, John Rwangombwa, the growth in the financial sector was largely driven by improved efficiency, higher deposits, increased contributions, as well as rising investment income.

Banking Sector

The banking sector assets grew by 21 per cent to Rwf 7.9 billion by June 2024, up from Rwf 6.5 billion during the same period last year.

The Central Bank attributes this growth to a 23 per cent rise in customer deposits and a 28.9 per cent increase in equity.

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The banking sector&039;s balance sheet remains dominated by loans, which make up 52 per cent of total assets, followed by investments in government securities at 17.7 per cent, and placements in other banks at 17.1 per cent.

Speaking to the New Times, Chief Executive Officer of the Bank of Kigali, Diane Karusisi, said that though stable, the banking sector needs to come up with relevant innovative products.

"The banking sector needs to continue creating innovative products that are relevant to the private sector," she said, adding that in order to deepen access to financial services in the country, banks need to go beyond checking accounts, mobile money wallets and other digital services.

Microfinance sector

The microfinance sector saw a significant balance sheet growth, with total assets rising by 36 per cent to Rwf 861 billion in June 2024 from Rwf 598 billion in June 2023.

According to the central bank governor, the growth was primarily driven by the shift of three microfinance banks to MFIs, which also saw customer deposits increase by 43 per cent, with the three banks accounting for 16 per cent of the sector's deposits.

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The sector&039;s liquidity remained robust, with a consolidated liquidity ratio of 87.5 per cent, surpassing the 30 per cent minimum requirement, driven by increased deposits, capital growth, improved asset quality, and profitability.

According to Rwangombwa, progress has been made on the consolidation of Umurenge SACCOs.

"Following the completion of automation for 416 U-SACCOs, we expect consolidation in four districts to be done by the end of this year as a pilot phase and by July 2025, the consolidation process of the U-SACCOs at district level should be complete," he said.

Insurance sector

The insurance sector's total assets increased by 17.6 per cent rising from Rwf 876.7 billion in June 2023 to Rwf 1,031.3 billion in June 2024.

The growth, according to NBR, was driven by higher investment income and improved underwriting performance, which strengthened the sector’s stability and its capacity to fulfill policyholder obligations.

The sector's solvency ratio increased to 269 per cent in June 2024 from 256 per cent in June 2023, well above the 100 per cent minimum requirement. Liquidity ratios also increased to 119 per cent from 110 per cent in the same period.

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Though demonstrating a strong performance, Rwangombwa expressed concern on the lack of depth in the insurance sector.

"Though the insurance sector has built a strong base, its depth remains shallow. There needs to be more innovative products that serve the needs of different economic actors," he said.

Pension Sector

The Pension sector, the second largest sub-sector, is predominantly driven by the mandatory Rwanda Social Security Board (RSSB) scheme for salaried workers.

The public pension fund's assets increased by 16 per cent from Rwf 1,448 billion in June 2023 to Rwf 1,673 billion in June 2024, driven by an increase in both contributions and investment income.

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The Long-Term Savings Scheme, Ejo Heza Fund's assets grew by 29.8 per cent, increasing from Rwf 47 billion in June 2023 to Rwf 61 billion, supported by a 14.7 per cent rise in investment income.

The assets of private pension schemes (mainly catering for those outside formal employment) also increased by 17.3 per cent, reaching Rwf 95 billion, up from Rwf 81 billion in June 2023, driven by higher investment income and increased contributions.

Savings as a percentage of GDP stood at 14 per cent in 2022 against the country's target of 30 per cent. A low savings culture, low income, high living standards as well as inflation have been blamed for the low levels of saving in the country.