The banking sector recorded Rwf1.7 trillion in new authorised loans between January and September 2024, a 25 per cent increase from Rwf1.3 trillion recorded in the same period in 2023, according to National Bank of Rwanda (BNR).

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As a result, the total outstanding loans in the banking sector reached Rwf4.4 trillion as of September 2024, the Monetary Policy Committee (MPC) of BNR indicated in their statement last week.

The committee also indicated in their statement that outstanding loans in the microfinance sector increased to Rwf581.4 billion in the same period.

According to the central bank, this positive trend reflects the health of the financial sector, with banks and MFIs providing essential financing to the economy.

Overall, the quality of loans remained strong, with non-performing loans ratio of bank's and MFIs standing at 4.2 per cent and 3.8 percent, respectively, below the central bank’s benchmark of 5 percent.

John Rwangombwa, the Governor of the central bank, explained that banks currently have ‘efficiency gains’ leading to making profits.

The committee noted that the financial system remains stable and well-positioned to withstand shocks, although the challenges remain.

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As of September 2024, the aggregate capital adequacy ratio (CAR), a measure of the ability of lending institutions to absorb potential shocks, stood at 21.2 per cent for banks and 30.8 per cent for MFIs, both well above the minimum regulatory requirement.

At the same time, the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR), key measures of liquidity in the banking sector, remained well above regulatory thresholds, underscoring the sector's ability to meet its funding needs.

Similarly, the liquidity ratios of MFIs and private insurers exceeded regulatory requirements, further demonstrating their capacity to manage funding demands.

Asset quality

Consistent with the stability indicated, the total assets of the financial sector also increased.

In lending institutions, assets in the banks and MFIs, grew by 22.9 percent and 40.4 percent respectively, largely due to improved growth of deposits and retained earnings.

"This growth in lending is the main driver of the growth in assets in the financial sector; banking industry and the same in microfinance as premiums in insurance contributed to the growth of the assets,” John Rwangombwa, the Governor of the central bank, said.

According to the central bank, the higher growth of assets in the microfinance sector reflects the migration of three microfinance banks to the microfinance sector.

Pension, insurance sector performance

Assets in the pension, expanded by 21.6 percent primarily driven by the increase in contributions and investment income.

The investment income in the pension sector has grown by 64 per​ cent to Rwf26.8 billion in the first quarter of the financial year 2024/2025.

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For the insurance sector, total assets increased by 16.1 per cent on account of the growth of equity, investment income, and retained earnings.

Policy underwriting continued to grow, with premiums for private insurers increasing by 19.3 per cent to Rwf154.8 billion in the first nine months of 2024, compared to nine months of 2023.

However, claims also increased, particularly in motor and medical insurance.

Motor insurance claims are mainly explained by the increase in motor accidents and high prices of motor spare parts.

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As a result, the claims ratio increased to 59.4 per cent, up from 58 per cent.

Despite the rise in claims, the underwriting returns continue to improve due mainly to the reduction in expenses.

"In the insurance and pension sectors, assets remain well diversified, with increased allocations to fixed-income instruments such as government securities and bank placements to minimize risks and maximize returns,” the MPC statement showed.

The insurance sector's investment income increased by 42 per cent to Rwf20 billion in the first 9 months of 2024, compared to the corresponding period of 2023.