Banks brace for hard times as customers struggle to recover

Sunday February 20 2022

Lenders have expressed fears that slow recovery of businesses may push of non performing loans. PHOTO | Cyril Ndegeya


Commercial banks are bracing for tough times ahead as fortunes of many of their customers are unlikely to change any-time. This, experts said, is likely to worsen the ratio of bad debts in 2022.

Although the economy has been slowly opening up as the pandemic thawed in the past few months, with some businesses reopening, many are too impaired to even operate leave alone make profit to service their loans.

Many businesses across sectors like manufacturing, agriculture, hotels, transport and construction that were given moratoriums at the height of the Covid-19 pandemic in 2020 are not yet back on their feet two years later.

Yet, some, for instance transporters, that have had their buses parked for a long time need more financing to repair and buy parts for their fleet so they can resume work upon opening of the border with Uganda. 

Others like hotels, event organisers are not getting sufficient business despite being open. Even bank customers like exporters of agricultural goods, construction sector players, among others that had braved the first year of the pandemic to pay their loans, were heavily hit in 2021, as import and export supply chains faced difficulties which forced many to even exit business.

Leading financial sector players like Bank of Kigali are looking at new possible ways to accommodate customers already on their books that are still wrestling with effects of the Covid 19 pandemic,  as they also explore financing more lucrative sectors such as mining, traditional exports in 2022.


Although a number of banks turned a profit in quarter three of 2021, the sector was strongly hit by the pandemic, with some lenders even expecting a higher non performing loans ratio and provisions in the fourth quarter results.

“Businesses are still impaired, the virus continues to hurt many of our customers, we still expect high NPLs going forward that’s why we continue issuing provisions” said Diane Karusisi, chief executive of Bank of Kigali.

For Hannington Namara, managing director of Equity Bank Rwanda, the bank's outlook for 2022 is both defensive and offensive, that they will continue to try and accommodate their customers as well as looking at where to invest. 

He said they have the liquidity so the bank will expand its loan book in 2022. He observed that major impairments in 2021 were recorded in transport and logistics, tourism and hospitality, real estate, agriculture sectors, with many customers still having a long way to recover even after getting moratoriums.

Rwanda plans to increase its 2021/2022 spending by $608.7 million to $4.2 billion as government plans for debt repayment and Covid-19-related expenditure, including vaccine rollout.

The country’s overall budget for the current fiscal year will rise from the initial $3.6 billion under the changes tabled  in Parliament for approval this past week.

Debt servicing took a big chunk of the additional spending at $327.6 million. Uzziel Ndagijimana, Minister of Finance and Economic Planning,  told Parliament that debt repayment will absorb a total of $734.1 million on account of the 2013 Eurobond redemption and the RwandaAir debt servicing.

Despite a difficult 2021, banks turned a profit with Bank of Kigali registered a 33 percent growth in net profit for the nine months to September.