East African Business Week

KIGALI, RWANDA - Rwanda's credit to the private sector is expected to grow above 30% end of the year much higher than initial projection of 19.2% Central Bank Governor Claver Gatete said recently.
Due to high credit growth, Rwanda has revised growth forecast to 8.8% from the initial 7%.
According to the credit statistics from the Bank's Financial Stability Directorate, as of September, new authorised loans had hit Rf239.38 billion (US$403.7 million) compared to Rf192.7 billion ($325 million) in 2010.   
Commerce, restaurants and hotels had sought more credit than other sectors. This section had obtained Rf85.76billion ($144.6 million) compared to Rf85.4 billion ($144,013,490) in the same period last year.
It was followed by public works and building industry with Rf61.65 billion($104 million) against Rf30.84 billion($52 million) in the same period in 2010.  Agriculture, which generates more than a third of Rwanda's growth, had borrowed Rf9.90 billion($16.7 million) against Rf3.43 billion($5.8 million) last year.
Much of the credit growth has been attributed to high liquidity levels in the banking system as well as improved credit information.
Between November 2010 and October 2011, the central bank had kept its benchmark interest rate at 6% to entice credit growth and it has paid out.
Beginning October, the rate was raised to 6.5% to curb further liquidity growth in order to control the rising inflation which eases to 6.64% in September from 7.52% in August and is expected to reach 8.2% end of December.
Rwanda established a credit information bureau in August last year making it a little easier to know the borrower's credit history, which is used to determine the creditworthiness of the borrower.  
Due to the establishment of the credit reference bureau, Rwanda's ranking on giving credit in the World Bank's 2012 Doing Business report released recently jumped 29 places to the eighth position.
The Managing Director of Commercial Bank of Rwanda (BCR) Mr. Sanjeev Anand says generally, credit has grown compared to the last two years.
"In inflationary terms and real terms, in the last two years, the credit had actually declined; for it to go up now, is a good thing but in a sense it is also a catch up of credit that fell down in the last two years," said Mr. Anand, who is optimistic that his bank will make a profit this year.
He, however, said that he doesn't think that there is 'an overdose of credit'.
"Some of it reflects and increase but some of it reflects the fact that for the last two years banks were not extending credit," he added.
In 2009, Rwanda's credit was negative because of domestic liquidity crisis and after effects of the global financial crisis and recession.
In 2010, it tried to recover but at a slow pace. This year, the banking sector expects higher profits as compared to last year.
As the country strives to build a strong industrial base more people will seek funds to start or maintain their businesses thus boosting banking. This will require financial discipline since many people fear to borrow.