Borrowers, especially small business start-ups, have for long complained of what they call prohibitive loan interest rates charged by local banks and microfinance institutions (MFIs). Now that Senators have added their voice to that of ordinary Rwandans, especially small business operators, the Central Bank (BNR) should heed the voice of the people and intervene. On average, commercial banks presently charge 17 per cent interest but some go as high as 24 per cent. However, the Repo Rate, the rate at which the Central Bank lends to banks, has been at a low of 6.5 per cent since June 2014. BNR says it cut its lending rates to encourage commercial banks to lend to the private sector, however, no bank has cut its rates over that period. They argue that they secure funds at high rates from global lenders. The increasing default rate could be partly blamed on expensive capital, which some borrowers, particularly SMEs, fail to repay in the end. Bad loans are currently above BNR’s target of 5 per cent. In the MFI sector, bad loans go up 7 per cent. So, why do banks that are facilitated (through Repo Rate reductions) not reciprocating the gesture by reducing their interest rates? It is, therefore, time for the powers that be to call banks to order. In the region, banks in Kenya and Uganda always adjust their interest rates accordingly whenever the central banks in the two countries cut or increase their key lending rates. Why doesn’t that ever happen in Rwanda? Maybe it’s time the Senators and other policy-makers tasked the regulator to ensure borrowers acquire affordable capital. Otherwise, the inaction by the central bank and policy-makers is hurting the ordinary Rwandan, leaving many without any savings. Others have lost their properties to auctioneers’ hammer after failing to repay loans.
