National Industrial Credit (NIC) Bank, considered to be a second tier bank within Kenya’s banking industry is set to enter the Rwandan market - a move that will increase competition within the country’s banking industry.

NIC says that its decision to invest in Rwanda is premised on the country’s favourable investment regime that runs in tandem with the bank’s growth strategy that seeks to exploit opportunities emerging from the common market.

Ranked 163, last year, of Africa’s top 200 banks, according to Africa Report magazine, NIC boasts of assets worth $860m with deposits of $700m as at September 2010.

In 2009 NIC opened shop in Tanzania through a buyout and buoyed by its success in Tanzania, it is now looking at opportunities in Uganda and Rwanda during the course of this year.

"All the bank’s subsidiaries were profitable in 2010. In particular, the bank’s maiden foreign acquisition NIC Bank Tanzania recorded a significant turnaround in performance,” the Bank’s Managing Director, James Macharia said.

NIC’s pre-tax profit rose by 71 percent to $31.75m in 2010, largely on account of a rebound in economic growth on Kenya’s economy, the bank’s officials said during a recent press briefing.

It said that it is seriously considering a more prominent foothold in the larger EAC market to cut its reliance on the Kenyan market, which generated over 80 percent of its revenues last year.

"We are now seeing the fruits of diversification having started as a one-product instalment credit company in 1959 to the current offering of a wide range of financial services, both corporate and retail, as a fully fledged commercial bank,” Macharia said, adding that; "We are scanning for M&As (mergers and acquisitions) opportunities with focus on finding a bank whose strategy fits in ours as we did in Tanzania, but if we fail we will go green field in one of the cases.”

Sources within the National Bank of Rwanda who wished not to be named, however intimated to Business Times that green field  operations is the most preferred mode for issuing new banking licenses for new entrants such as NIC due to high buyout costs  arising out of traditional M&A deals in Rwanda.

Competition amongst licensed commercial banks in Rwanda is expected to move a notch higher with the entry of another Kenyan banking brand, Equity Bank, which is scheduled to start operations by end of the first quarter of 2011.

Equity Bank’s entry is anticipated to boost Rwanda’s Small and Medium Enterprises (SMEs) that are currently struggling to access financing from the existing commercial banks. Analysts contend that Rwandan policy makers consider the SMEs as one of the key value drivers of actualizlng the country’s ambitious transformation agenda.

"We have been processing Equity’s application and it is almost complete. "I do expect their operations in Rwanda to put  a lot of pressure in the banking system because such pressure will ultimately increase competition,” central bank Governor, François Kanimba said at the launch of the Monetary Policy and Financial Stability statement recently.

In the last 4 years Rwanda’s financial system has been undergoing a major overhaul following key policy moves meant to place a  high priority on financial sector development.

Such policy moves are seen as an integral element in Rwanda’s long-term plan to transform itself into a middle-income country and more so to boost its bid of being an economic, trade and communications hub.

Consequently various banking brands from the African continent have gained entry in the local banking industry. The new policies instituted have thus brought the number of licensed players to 9 prior to Equity’s entry.

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