Financial sector support to
the private sector’s long-term
plans
Outline:
• The role of the financial sector in
supporting private sector
development
• Challenges of the Rwanda financial
sector
• How they are being addressed
• What is the role of development
partners?
The role of the financial sector in
private sector development
• Domestic capital formation is fundamental to any
country’s economic development and effective
financial institutions are a prerequisite.
• Financial sector promotes private sector
development through these pillars:
 Enhances savings mobilisation and efficient
allocation of resources into productive
investments hence increasing productivity
The role of Financial sector- contd
Facilitating trade, capital flows in form of
FDI and remittances from abroad
Intermediating between savers and users
of capital thus reducing transaction costs
Increased access to financial services
reduce informal sector business
transactions
Financial sector challenges in
Rwanda
• Very limited access to banking and other
financial services outside Kigali and the
provincial towns:
 Commercial banks have a combined 38
branches only all located in towns
 Insurance products are undiversified and its
penetration is still very low
 MFI’s which should play a significant role in
filling the gap have been marred by a weak
financial base, and inadequate management
Challenges in the Financial sector
• Narrow, shallow, non-competitive financial
sector- Financial depth measured by M2: GDP
of 18.1% , credit to private sector: GDP of 10.9%
are still low even by sub Saharan Africa levels
• Poor saving culture
• Lack of long-term resources for funding
investments due to undeveloped debt and
equity market
• Inadequate capitalisation.
Challenges-contd
• Undeveloped Payment system
infrastructure
• Weak legal and regulatory framework
for the NBFI
• Poor quality, and culture of auditing
and accounting in most organisations.
• Low level of human and institutional
capacity
What is being done?
• Rwanda government has developed a financial
sector development plan (FSDP) whose vision
is:
To develop a stable and sound financial
sector that is sufficiently deep and
broad, capable of mobilising and
allocating resources to address the
development needs of the economy
and reduce poverty.
Specific objectives
• Enhance access and affordability of banking and
other financial services
• Develop an efficient, competitive banking sector
with a diversified array of financial instruments
• Enhance savings mobilisation by introducing
appropriate instruments, developing institutions
and providing incentives for long-term savings
• Facilitate development of long-term financing
instruments and an efficient capital market
Specific objectives- contd
• Develop appropriate policy, legal,
regulatory and institutional framework for
contractual saving Institutions
• Develop sufficient institutional and human
capacity to deal with the challenges of the
sector
The scope of FSDP
• Banking sector, specialised lenders and
MFI
• Contractual savings industry
• Long-term finance and capital markets
• Payment system infrastructure
Policy geared to increase
Access to banking services:
• Strengthen Banking and MFI sector through
adequate capitalisation, improved regulation and
Institutional capacity building through Bankers
association and Umbrella MFI.
• Establish deposit guarantee schemes for banks
and MFIs
• UBPR to operate like a de facto commercial
bank while maintaining those aspects regarding
cooperative principles
Access- contd
• BHR to Issue mortgage backed bonds to
raise long term capital
• Banks including BHR to develop mortgage
savings accounts
• BHR to organise the property market
sector, real estate evaluation
• Banks to continue to develop leasing
products
Access- contd
• BRD to attract new equity shareholders as long
as it maintains its mission
• Continue to raise debt capital from external
sources( AfDB,IFC,EIB) on long term to be able
to on-lend locally
• BRD will diversify its loan portfolio to minimise
risk while investing in all targeted key economic
sectors .
• BRD to design bonds backed by good loans as
a vehicle to raise more capital
Development of
Long term Finance and capital markets
• Develop Long term government bonds to build a
yield curve by securitizing Govt Debt to CSR and
reissue the existing stock of TBills on a longer
term.
• Create a sound and facilitating environment,
legal, regulatory and operational guidelines for
an OTC market and for issuance of corporate
and municipal bonds
• Establish a Capital Markets advisory council
• Enact the company Act and Accountants bill
Long-term finance -contd
• Facilitate creation of private pension funds and
mutual trust funds by establishing a legal and
regulatory framework and inbuilt tax incentives.
• Increase penetration of CSR to include the self
employed
• Consolidate regulation of Contractual savings
institution ( Insurance and Pension) into a
department of BNR, specifically charged with
that responsibility
Development of Payment system
• Establish National payment council to
develop and implement a national
payment strategy.
• legislation on use of electronic payment,
once the payment infrastructure is fully
operational.
• Strengthen Simtel to accomplish its task of
providing an electronic payment platform
The role of the development partners
• Financial and technical support to the financial
sector reform agenda including institutional
capacity building.
• Financial contribution to establishing the MFI
deposit guarantee fund
• Extend long term credit lines to Rwandan
Financial Institutions for on-lending.
• Provision of credit risk guarantee on corporate
and municipal bonds, at least during the initial
period.
• Financial support towards public education in
the area of finance and entrepreneurship.
Thank you