Growing domestic demand, stable interest rates and a construction boom are contributing to a positive outlook for the banking sector, with players saying it is the right time for corporates to invest.

Local banks are financing some of the big projects in the country across sectors like construction, manufacturing, technology among others. For example Bank of Kigali is financing Mara Phones, prime cement, among others.

“We are operating in a fairly stable upward looking market right now; interest rates and interbank lending rates are stable and predictable and these are market conditions you want to see in the market,” said Maurice Toroitich, the CEO of BPR Atlas Mara, and president of Rwanda Bankers Association.

The National Bank of Rwanda said that domestic demand continued to improve in quarter one of 2019, supported by a growth in credit to the private sector, prompting it to cut its bank rate from 5.5 per cent to 5.0 per cent in order to enable banks to sustain growing demand.

The growth in domestic demand is expected to drive inflation to three per cent this year, from 1.4 per cent recorded in 2018.

Outstanding credit to the private sector and new authorized loans grew at a 16.2 percentage rate and 24.9 respectively, with the money spreading out across different sectors of the economy.

According to the latest data from the central bank, average interest rates for commercial banks stand at 17.61 per cent, the highest being 21 per cent and the lowest being 15 per cent for both individuals and corporates.

In the past few years, the market has grappled with growth in non-performing loans, going as high as 8.2 per cent in 2017, but the NPL trend has been reducing to 6.4 by December 2018.

The reduction in NPL’s ratio was seen across different sectors, for instance NPL’s in trade dropped from 12 per cent to 10 per cent; mortgages from 4.5 per cent to 3.7 per cent with agriculture registering the sharpest drop, from 10 per cent to 6.6 per cent.

“There is still a problem in the commercial space because the market does not have enough occupancy,” said Mr Toroitich.

He said that most of the auctions taking place are not a result of mortgage owners failing to pay but because individuals or businesses put the buildings up as collateral to get loans and now banks are selling them.

Most banks in Rwanda registered impressive numbers in terms of profitability in the first quarter of 2019, for instance Bank of Kigali registered Rwf7.5 billion in profits; Equity Bank Rwf1,924,729 billion, KCB Rwf498,304 million; Ecobank Rwf438,527 million, Cogebanque Rwf979,761 million, while I & M registered Rwf1,496,212 billion.