Banks urged to be disciplined to secure external financing

Admassu Tadesse is the president and chief Executive officer of PTA Bank, a multilateral bank with presence in 18 countries in Africa, including Rwanda. The Bank specialises in funding long-term projects in the country, seeks to increase its funding package to Rwanda to support the country’s industrialisation efforts and export-oriented projects, as well as facilitate infrastructure development to foster trade and enterprise growth and investment to combat unemployment and climate change. Tadesse was in Kigali last week and talked to Business Times Peterson Tumwebaze about the bank’s long-term strategy in the country and how investors can access funding from the Bank: Tell us about PTA Bank? The Eastern and Southern African Trade and Development Bank (PTA Bank) is mandated by member states to finance and foster trade, socio-economic development and regional economic integration across its member states. It offers a broad range of products and services to both the private and public sectors, including debt, equity and quasi-equity, as well as guarantees. The Bank supports investments in agriculture, trade, industry, infrastructure, energy and tourism. Why are you in Rwanda? We want to inform the business community and some public sector entities about the products and the kind of services we offer...We like the regulatory framework and the business environment. Rwanda inspires a lot of confidence among many financiers and investors. We also know that Rwanda has a strong vision for regional integration, so we want to see how we can support the establishment of regional infrastructure to improve cross-border trade. Do you have plans to set up an office in Rwanda in the near future? Our headquarters are in Burundi…Because we have a big presence in Burundi, we are currently supporting Rwanda from Bujumbura and Nairobi, Kenya. However, there is always a possibility of opening an office here with time, depending on how our growth agenda progresses. How can local banks increase their chances of securing finance for long-term projects? Financial institutions in Rwanda have done fairly well. However, long-term capital has always been a challenge not only in low-income countries, but also in developed countries. The challenge calls for specialised institutions and development of capital markets, where businesses can raise funding through bond issues. Also, for banks to overcome this constraint, they have to be disciplined, build institutions that allow them to tap into long-term funding from international investors, pension funds, insurance companies and the public who can buy into long-term bonds. What is important is to create a strong legal regulatory framework that is attractive to long-term players because these involve more risks than short-term ventures. We need to understand that money flows to where its best respected and treated; this is a basic condition for the success of financial institutions. Access to credit, especially for unemployed youth has remained a challenge, what is your take on this situation? It’s a global problem that should attract attention of everyone, including financial institutions. We need to offer the best possible incentives that will attract more investments, which will directly translate into jobs. How big is your investment portfolio in Rwanda, and what’s your target? We don’t have a target, but we already disbursed about $100m across various sectors in Rwanda and another $65m of approved projects that we are going to disburse over the coming months. We can do more than $500m over the years to come, the bank is growing and we have the capacity. What’s important is to focus on the projects that are economically-viable and support the development needs of the country. PTA Bank gives priority to commercially-oriented projects that are well-performing. This is important because clients have to be performing and able to repay the loans because we are a responsible lender. The region still struggles with high interest rates, how can this challenge be handled? This is a complex subject…You are talking of an average of 20 to 22 per cent in most countries. It is only Kenya that has managed to bring down the rates to between 16 per cent and 18 per cent. This is really a macro-economic, financial sector based and demand and supply issue. However, we always try to bring down our cost of funding by trying to be more disciplined and raising our credit rating. What are some of the challenges in funding long-term ventures? We ensure that we remain well-funded and capitalised to be able to support all qualifying investors. The Bank has been growing at about 30 per cent per year, giving us the capacity needed to handle the challenge. What is your message to the private sector? Business people in Rwanda should take advantage of the conducive environment as well as forge partnerships with international investors to grow their enterprises. The Diaspora has to come back home and establish investments here; the government has laid a foundation for them. There is nothing that should stop them.

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Banks urged to be disciplined to secure external financing