Banks comfort distressed clients with special products

Tuesday May 12 2020

bank

Bank of Kigali has introduced a Covid-19 economic relief loan product. PHOTO | CYRIL NDEGEYA 

MOSES K. GAHIGI
By MOSES K. GAHIGI
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Rwandan lenders are working around the clock cushion the ever-growing number of distressed clients with financial relief products that have been introduced in the market.

For example, in less than two weeks, Bank of Kigali’s (BK), “Turikumwe,” a special salary loan product, has recorded more than 2,000 online applications and 150 loan approvals. In addition, the bank is processed 500 applications.

Information from BK shows that many of the applicants are high ranking government officials who forewent their April salaries as contribution to Covid-19 relief for vulnerable people, and needed a reprieve from cash flow challenges.

BPR Atlas Mara introduced a salary loan specifically for government officials who offered their April salaries to Covid-19 relief causes, which has also been adequately subscribed.

“Many of our clients were seriously affected, some are hotel staff whose contracts were suspended for three months, we have so far received applications from those who were affected and even those that were not,” said Ntabwoba Bonaventure, head of branch business at BK.

BK is charging 15.5 per cent interest on its relief salary loan, payable in 12 months, with a grace period of three months. Once approved, the client can get up to two months’ worth of their salary and the maximum the bank can disburse is Rwf10 million. The BPR atlas Mara’s loan offers salary equivalent of one month. The banks do an internal assessment of the applicant, to ascertain if they have an active contract with the employer, to minimise the risk. Clients whose contracts have been suspended by employers for three months for instance, qualify for the Turikumwe loan.

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“At least we know with government employees we are safe because we are sure their jobs will not be lost,” said Mr Ntabwoba. Customers apply for this loan facility digitally, the deadline for applying for Turikumwe is May 31, 2020, and can be approved within 48 hours.

I&M Bank Rwanda reduced its base lending rate from 16.5 per cent to 16 per cent, as the bank moves to give its customers relief on their loan repayment burden during this time when the pandemic has dealt shocks to a number of sectors.

The reduction, which took effect on April 15, will apply to those currently servicing loans and those who will borrow in the coming days.

The lender has over Rwf170 billion in loans and advances to customers, and the reduction is expected to cost the bank between Rwf80 million and Rwf100 million in the initial months.

Following the central bank’s directive that banks ease loan repayment by facilitating loan restructuring for their clients, banks have already done so for many of their customers, while others are still receiving and processing applications.

BK has already received more than 1,000 loan-restructuring applications from its retail clients from all affected sectors, and more than 500 files are being processed for SMEs.

Maurice Toroitich, chief executive of BPR Atlas Mara said they have processed moratoriums for many of their customers, where interest and principle payments have been differed, to ease repayment pressure during this time.

“Seventy to 80 per cent of our SME’s customers have already applied for the moratoriums,” said Mr Toroitich.

He also noted that the bank does not charging any fees on digital transactions to make it easy for customers to make cashless transactions.

Tourism and hospitality customers have asked for more than three months’ grace period, which all banks are positively responding to, giving them up to 12 months.

For customers who want to continue servicing their loan facilities, BK has waived all late payment penalties on term loans, including BK quick loans and credit card penalties for the months of March, April and May.

Tourism and hospitality sector has up to Rwf87.7 billion in outstanding loans, yet it still needs Rwf29.98billion to continue operations amid the current Covid-19 shocks.

The National Bank of Rwanda recently slashed its lending rate to 4.5 per cent from five per cent, to stimulate economic growth amid the coronavirus pandemic that has dampened economic activity.

The central bank also eased prudential requirements to exceptionally allow banks to restructure outstanding loans of borrowers facing temporary cash flow challenges arising from the Covid-19 pandemic. By April 10, commercial banks had restructured loans worth Rwf255 billion ($272 million).

A reduction in the reserve requirement in March released Rwf23.4 billion ($25 million) at the start of April, while a credit cushion of up to Rwf50 billion ($53 million) is still available for lenders.

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