The Independent (Kampala)
Magnus Mazimpaka
23 June 2011
opinion
It is still dark, and a woman we’ll refer to as Jeannette has just woken up. The widowed mother of three takes a shower, dresses, and before she leaves informs her 12 year old boy that money for groceries is on the table. She opens the door and commences her daily 5km walk to Nyabugogo grand market in Kigali city, where she sells second-hand clothes.
The routine, says Jeanette, drives her crazy. It’s not that she hates her business, but she returns home everyday frustrated that it is too small to generate any savings or reinvestments. She has tried to apply for loans at a microfinance bank, but was denied because she was unable to provide collateral or prove that she had 30 percent of the required money in savings.
Jeannette’s story is emblematic of the challenges thousands of Rwandan women entrepreneurs routinely face. Although they may have good ideas, a lack of collateral and insufficient education to produce required business plans often hampers their ambitions. However, on May 25, 2011 Bank of Kigali (BK), Rwanda’s leading bank launched numerous products to tap into the potential of the unbanked rural poor, especially women, youth, retired and the aged.
The products include the women entrepreneurship account, aimed at offering women access to low-interest loans ranging from Frw100, 000 to Frw100 million. The loans will be available without collateral, and the bank will also provide business advisory services.
“We know we have a responsibility to contribute to the social, economic development of our people; the three products are meant to transform the lives of the people whom we think are excluded from accessing finance,” says Naibo Lawson, BK’s Chief Operations Officer. “You cannot fight poverty without empowering the women, the youth and aged people.”
Since the official launch of the products, the bank has been overwhelmed by an influx of women clients. BK says it has started processing the loan documents, but the high demand will take weeks to finish. Nevertheless, Naibo is confident BK will able to mobilize all the funds required to meet this demand.
In order to fund these new loan schemes, Naibo says BK had to mobilize US$20m from the French Development Agency, $7.15 million from the European Investment Bank and expects additional US$12m from the International Development Bank.
During the signing ceremony of the agreement, James Gatera, BK’s Managing Director said, “We believe the credit line agreement will translate into higher demand for credit and we intend not to discriminate any project in the economy.”
Observers say the new policy will also help Rwanda defend its reputation as a pro-women country. Previously, despite having many pro-women policies and campaigns in various social and economic fields, thousands of women felt like they were being left out from Rwanda’s rapid development.
Constance Uzagerayo is one of the women applying for the new loan. “Personally this is a big opportunity to improve my family’s status,” she says. “I have no business of my own and I am living in an impoverished state…When I get this loan, I will start up a shop which will take care of me and my family.”
However, Januario Mucyo, BK’s Marketing Manager warns customers that their applications still need to be subject to certain procedures before any money is issued. “Our (loan) analysts will check if they fulfill the criteria,” he says pointing out that applicants must have at least a three month banking history record. “We will not just give money, it is too risky.”
Mucyo adds that there are exceptions. “Those with a solid plan describing properly how they will pay back the loan and how they will make profit will get easily get the loans.”
BK is Rwanda’s largest bank and accounts for 27 percent of the sectors banking assets. Moreover, according to a recently published central bank report on the banking sector, BK generated 56.5 percent of the total profit made by all the banks in Rwanda and in terms of assets and capital all combined, BK grew from 97.7 percent in 2006 to 197 percent in 2010.
BK’s growth is a result of Rwanda’s solid monetary policies and a well controlled economy. Other banks enjoy the same enviroment, but BK has displayed impressive business execution. BK says it will also increase its lending by 30 percent from Frw110 billion last year to Frw130 billion this year.
Meanwhile, before BK introduced these loan products, the government had earlier requested the International Monetary Fund (IMF) to allow the bank to access non-concessional loans. However, IMF responded by saying that if BK went for short-term commercial borrowing, the debt would increase government’s debt burden.
But BK says there should be no concern. Naibo says that BK’s position in Rwanda allows it to take certain risks that smaller banks would not be able to. “We can wither all the storms,” he says.
“We are on the right path,” says Naibo. “If you are earning a dollar a day, then our objective is for you to earn ten dollars a day, and if you earn one hundred dollars a day, we want you to earn a thousand dollars.”
Nevertheless, there have been concerns that BK’s products might hit a snag, especially due to the risk of lending money to sectors like agriculture. But the government has come out saying it will support the initiative, in addition to its plan to sell 68 percent of its shares in BK.
The government has also set aside a fund in the Rwanda Development Bank which will buy 50 percent of the loans. Insurance companies have also bought the remaining 50 percent. This means that in case that some of these women become defaulters or their businesses fail, the bank will not incur the loss.
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