Former Development Bank of Rwanda chief executive Alex Kanyankole was arrested on October 2 over loss of money at the institution.

The Rwanda Investigations Bureau said Mr Kanyankole is being held on “suspicion of favouritism and receiving illegal benefits in order to offer a service, committed when he was still in office.”

RIB spokesperson Modeste Mbabazi told The EastAfrican that the former CEO was being questioned and prosecutors would press charges.

A source close to the investigations said that Mr Kanyankole was being investigated over the loss of up to $22 million, which left the 50-year-old bank on the brink of collapse.

Mr Kanyankole was sacked last December.

Profits plunge

The bank’s 2017 financial report shows that profitability reduced by 638 per cent, from a profit of $4.07 million in 2016 to a loss of $22 million. The loss was attributed to poor operational performance and increase in provisions for outstanding assets and receivables.

The bank said operating income after impairment charges for the year decreased by 170 per cent to a loss of $7.7 million in 2017 compared with $10.9 million in 2016.

According to the bank’s annual report, impairments for 2017 increased from $1.6 million to $14.2 million, an increase of 738 per cent. The bank blamed this on the deterioration of loan book quality.

BRD also incurred heavy losses on equity investments amounting to $6.5 million, leading to a 19 per cent reduction on equity investments.

BRD’s total assets declined by three per cent, from $253 million in 2016 to $244 million in 2017. The bank’s equity fell by 34 per cent from $65 million in 2016 to $42.7 million at the end of 2017.

The bank, whose major mandate is to finance investments in strategic areas of the economy, has been run down to the extent that its capital levels are almost depleted due to the high number of non-performing loans.

An external audit report by Ernst and Young Rwanda Ltd showed that for the six months ending June 30, BRD did not hold the minimum 15 per cent total capital adequacy ratio, instead, its capital levels were below 13.4 per cent.

The low capital levels of the development bank forced the government and the Rwanda Social Security Fund — both major shareholders — to inject an additional $22.1 million new capital in the first six months of this year.

Official documents seen by The EastAfrican show that the government injected $4.9 million while Rwanda Social Security Fund pumped in $17.2 million to enable the bank to lend. Without these funds, analysts say the National Bank of Rwanda would have closed down BRD.

“As of June 30, the bank’s total capital adequacy ratio was 13.4 per cent against the total required capital of 15 per cent; its core capital was 8.7 per cent against the minimum of 10 per cent,” according to Ernst & Young Rwanda.