Banks in Rwanda have made decent profits over the past decade. Their net profits have collectively soared from about Rwf71 billion in 2014 to over Rwf250 billion in 2023, a recent report showed. Their asset quality and equity positions have grown in tandem. Banks earned a steady 1.7 per cent to 2.3 per cent profit on average from their assets. This profitability jumped significantly to 4.7 per cent by September 2023. The average return on equity has been stable in the range of 10-15 per cent during the period 2014-2020. It jumped at 21.5 per cent by September 2023. This suggests that banks have done a superb job of using their shareholder equity profitably. With that, the banking industry has accomplished one of its core duties, which is to generate and return better profit margins to its shareholders. While generating profits for shareholders is important, banks have a duty to act in the best interests of their customers, they owe the highest loyalty, honesty, and care to protect the beneficiaries’ best interests. Already, banks have played a key role in providing a secure and convenient place for individuals and businesses to store their money, and to facilitate transactions and payments. They have played an active role in allocating capital and financing the economy. Over the past decade, private sector credit has expanded at double digit rates – except in 2016. We have seen increased lending to manufacturing, residential and commercial properties, trade, hotels, as well transport and communication. We need to see more activity happening across agriculture, mining, financial services, as well as water and energy. Banks are sufficiently incentivised to maintain a positive lending position to the private sector. We should, therefore, see more work happening on the financing front. This could mean designing affordable and innovative loan products, financing affordable housing, availing capital for sectors that have traditionally been ignored such as agriculture, or investing in technology tools that allow people to access mobile loans faster and efficiently. Some banks such as I&M Bank and Bank of Kigali have shown interest in lending to small and medium sized enterprises, the lifeblood of our economy. Others should follow suit.
