Rwanda is a relatively small landlocked, hilly, and fertile country in east-central Africa with a densely packed population of 13.3m. It borders the far larger and richer Democratic Republic of Congo, as well as its closest East African neighbors - Tanzania, Uganda, and Burundi. Rwanda has guarded its political stability since the 1994 genocide of the Tutsi. With the support of the International Monetary Fund (“IMF”) and the World Bank, the country has been able to make important economic and structural reforms and sustain its economic growth rates over the last decade. Tourism, minerals (gold, tin ore, tungsten ore), coffee, and tea are Rwanda's main sources of foreign exchange. However, inadequate infrastructure (electricity, water, internet, affordable financial services), instability in neighbouring states, and lack of adequate transportation linkages to other countries has hampered private sector growth.
EADB is a regional MDB that is mandated to strengthen socio-economic development and regional integration. It has ownership by 4 African member states and a few institutional shareholders. Headquartered in the Republic of Uganda, EADB was established in 1967 under the treaty for East African Community which was disbanded in 1977 and later revived in 1980. Following this, the Bank was re-established under its own charter, with an expanded potential membership, mandate, and operational scope. As such, EADB is accorded preferred creditor status equivalent to that of the AfDB including privileges and immunities such as diplomatic and tax-exempt status.
- The Rwandan banking sector appears to be on a sound financial footing, however rising asset quality pressure and a stressed government fiscal position, emanating from the adverse operating environment has led to a slight moderation in the GCR Financial Institutions Sector Risk Score.
- In our opinion, asset quality is weakening, with non-performing loans increasing to 6.6% at 31 March 2021 and the cost of risk reaching a five year high of 3.6% in 2020. Furthermore, we estimate restructured lending to be around 20% of total loans.
- The average capitalisation of the banks reduced to a 3 year low of 20.3%, at 31 Dec 2020, but remains solid supported by moderately strong earnings.
- Funding structure is somewhat reliant on the interbank market. However, liquidity, both in local and foreign currency, appears to be adequate despite loans to deposits creeping above 110% at 31 Dec 2020.