GCR lowers Rwandan Financial Institutions Sector Risk Score to ‘3.75’ from ‘4.00’
Johannesburg, 26th May 2021, GCR Ratings (‘GCR’) have lowered the Financial Institutions Sector Risk Score for Rwanda to ‘3.75’ from ‘4.00’. The Financial Institutions Sector Risk Scores are available for download at https://gcrratings.com/risk-scores/.
The GCR Financial Institutions Sector Risk Assessment
The Financial Institutions sector risk score (ranging from 0 to 15) is a key factor in the operating environment component score. The core of the GCR Ratings Framework is based on GCR’s opinion that an entity’s operating environment largely frames its creditworthiness. As a result, the operating environment analysis anchors the underlying risk score for the GCR rating methodology. GCR combines elements of the country risk and sectoral risk analysis, blended across countries for entities operating across multiple jurisdictions, to anchor an insurer to its current operating conditions. For more details on the above, please read the related criteria and research listed below.
GCR will periodically publish updated “Financial Institution Sector Risk Scores”, which will supersede previous publications. The publication titled “GCR Financial Institutions Sector Risk Scores, * May 2021”, available at https://gcrratings.com/risk-scores/, supersedes the article published on 21st May 2021.
Financial Institutions Sector Risk Score
Rwandan Financial Institutions Sector Risk score: ‘3.75’. Country Risk Score ,3,5, Mapping Table 3,5 to 4.0
The Rwandan Financial Institutions Sector Risk Score of ‘3.75’ balances the weakening government fiscal position (government debt to GDP ratio is expected to increase to 80% by end of 2022 from 71% in 2020) with the banking sector’s rising levels of non-performing loans (non-performing loans increased to 6.6% at 31 March 2021 and the cost of risk reached a five year high of 3.6% in 2020). It also reflects the estimated high degree of restructured lending (c.20%) and relatively moderate foreign currency loans versus regional peers. Additionally, it factors in regulation and sector wide governance standards, which are deemed to be appropriate for its current levels of development and complexity. We do consider the sector to be somewhat overbanked given the size of the economy, noting that the top tier of the sector is controlled by a few players but that regional banks are increasingly competitive in the country. Positively, the banking sector appears well capitalised on average (c.20%), and profitability is solid and stable. Funding is largely deposit based, with limited wholesale and external funding, but some banks are reliant on interbank funding. The local capital markets are considered to be relatively underdeveloped.
Group Head of Ratings
Johannesburg, South Africa
+27 11 784 1771
Senior Analyst: Financial Institutions
Johannesburg, South Africa
+27 11 784 1771
Related criteria and research
Criteria for the GCR Ratings Framework, May 2019
Criteria for Rating Financial Institutions, May 2019
GCR Ratings Scales, Symbols & Definitions, May 2019
CREDIT RATINGS ISSUED AND RESEARCH PUBLICATIONS PUBLISHED BY GCR, ARE GCR’S OPINIONS, AS AT THE DATE OF ISSUE OR PUBLICATION THEREOF, OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. GCR DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL AND/OR FINANCIAL OBLIGATIONS AS THEY BECOME DUE. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: FRAUD, MARKET LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND GCR’S OPINIONS INCLUDED IN GCR’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND GCR’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND GCR’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL OR HOLD PARTICULAR SECURITIES. NEITHER GCR’S CREDIT RATINGS, NOR ITS PUBLICATIONS, COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. GCR ISSUES ITS CREDIT RATINGS AND PUBLISHES GCR’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING OR SALE.