II 4 OVERVIEW OF A FINANCIAL SYSTEM IN RWANDA
The National Bank of Rwanda (NBR) i.e. the Central Bank has the
sole responsibility for monetary policy and its principal objective is to
ensure price stability within the system. All financial institutions are
subject to supervision and regulation by the NBR under the Banking Law of 1999.
On 31st December 2007, the Rwandan financial sector was made
up of six commercial banks; a development bank; a housing bank; a micro-finance
bank; a discount house and two hundred thirteen (213) micro-finance
institutions, from which two hundred (200) were cooperatives while twelve (12)
were public limited companies and one (1) private limited company. Among other
financial institutions operating in Rwanda, there was the unit of the Giro
Account of the Post office, five (5) insurance companies and the Social
Security fund of Rwanda (SSFR)(Annual report on bank supervision period
1995 to 2007).
Micro-finance is an important part of the financial sector, led
by the Union des Banques Populaires du Rwanda, a network of micro-finance
institutions that served as micro-lenders and micro-banks for nearly two-thirds
of all depositors in the country. This institution controls over 97% of the
micro-finance sector in Rwanda.
Recently, most commercial banks have centered their operations on
trade finance as opposed to long-term debt financing. This has triggered off to
lack of productive investment activity, thus there is urgent need to focus
attention on the reform and strengthening of the financial sector. These
appeals for introduction of more banks, financial products and capital
market.
There are a number of opportunities for investment into mortgage
banks to enhance access to property, agricultural banks to offer credit to
farmers and introduction of new financial products including leasing and
venture capital to minimize hardships of opening business as well as its
continued successful operation NBR (Annual report on bank supervision
period 1995 to 2007).
II 5 EXTENDING RURAL FINANCE IN POST-CONFLICT ECONOMY IN
RWANDA
During the eight years since the end of the civil war and
genocide that ravaged Rwanda's society and economy in 1994, Rwandans and
international partners have worked diligently to rebuild the country. The
genocide not only led to more than 1 000,000 deaths and many more refugees and
internally displaced people, but also, in 1994, the GDP fell by 50%. Still
today, at least 60% of Rwandans live below poverty line according to the U.S.
Agency for International Development (USAID) and the International Monetary
Fund (IMF) report 1999, approximately 80% of the population lives in rural
areas. Immediately, before the war, the Union des Banques Populaires du
Rwanda (UBPR - the national federation of Rwandan credit unions) and over
130 affiliated banques populaires (individual credit unions) located
throughout the country, served 366,799 member clients. During the war, roughly
$7 million was stolen. The UBPR closed its doors, like other all financial
institutions including the Central Bank of Rwanda, during the war in 1994.The
UBPR reopened gradually with most banques populaires resuming
operations in 1996. By the end of 1996, there were 42,000 members and only 20%
of the pre-war staff. Between 1996 and 1998, credit operations were halted
since virtually all loans that had been granted before the war were
non-performing. Most pre-war borrowers were deceased or displaced and most
collateral as well as banque populaire records had been destroyed.
Banques populaires resumed lending in 1998. ( WOCCU report
2000).«Rwanda has
The World Council of Credit Unions (WOCCU) received funding
totaling of $3 million from USAID/Rwanda to carry out a four-year program of
rehabilitation and institutional strengthening of both UBPR (the federation)
and a limited number of pilot banques populaires. The WOCCU Rwanda
program fits within USAID/Rwanda's strategic objective of expanding economic
opportunities in rural areas, particularly under the rubric of improving access
to financial services. The program also responded to the desire of the Central
Bank of Rwanda for the banques populaires to provide credit for rural
development. The UBPR system, 148 banques populaires at year-end 2002,
has the widest geographical coverage of any financial institution in Rwanda.
The WOCCU Rwanda program (8/00-8/04),working in close
collaboration with the UBPR, set out in late 2000 to restructure the UBPR and
guide it from a loss-making position to a solvent position (WOCCU report
2000).
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