Commercial Bank of Africa enters Rwandan market

Saturday January 7 2017

An M-Shwari branded bus termini in Nairobi. PHOTO | EMMA NZIOKA

An M-Shwari branded bus termini in Nairobi. Commercial Bank of Africa (CBA) plans to launch an equivalent of its mobile banking product M-Shwari in Rwanda. PHOTO | EMMA NZIOKA 

By KABONA ESIARA

Kenya-based Commercial Bank of Africa has extended its footprint to Rwanda, where it secured a microfinance licence late December.

In avoiding the almost saturated corporate and commercial banking sector, analysts see CBA leveraging its experience in micro-lending elsewhere in the region to shake Rwanda’s buoyant but staid microfinance industry.

While details of the official launch of CBA Rwanda are yet to become available the bank has reserved space for its corporate headquarters at Rwanda’s latest business address Kigali Heights.

During an end of year media briefing on December 28, 2016 National Bank of Rwanda Governor John Rwangombwa confirmed that CBA was due to be licenced that week.

While CBA was not immediately available to speak about its Rwandan plans, it is joining a healthy but competitive 13-horse industry dominated by three big lenders.

Experts say microfinance banking offers better opportunities for investors seeking growth opportunities as that segment has only four players. it is also profitable with negligible stress levels.

According to the second quarterly fiscal report for 2016, microfinance institutions’ profits grew to Rwf7.1 billion in the first nine months in 2016, a 39.7 per cent increase compared with the same period in 2015.

But non-performing loans eroded the segment’s capital adequacy ratio (CAR) which slipped 8 points from 41.2 per cent in 2015 to 33.2 per cent in 2016 which is still well above the 15 per cent prudential requirement.

Microfinance on-performing loans increased from 7.8 per cent in September 2015 to 8.2 per cent of the total portfolio in 2016. Liquidity, however, rose to 90.4 per cent in the first nine months of 2016 against 88.4 per cent during the same period in 2015.

The CBA chief executive Jeremy Ngunze last year hinted that he would replicate the mobile technology he has deployed in other East African countries in Rwanda encouraged by the high mobile penetration rates. Rwanda has over 8.8 million mobile phone subscribers.

Ivan Murenzi, a finance inclusion survey co-ordinator and analyst at Access to Finance Rwanda said with the right technology, infrastructure and products, CBA should be able to grow the cake by roping in more of the unbanked population.

A 2016 Finscope study of financial inclusion survey found that 4.4 million of Rwanda’s adult population was unbanked, “of which, 700,000 individuals do not use any financial products or services to manage their financial lives.”

In Uganda, the bank partnered with MTN Uganda to offer micro-loans on MoKash, in Tanzania it deployed M-Pawa while in Kenya, M-Shwari is the biggest success moving millions of shillings daily.

“They are financially excluded. If they save, they save at home, and if they borrow, they rely on friends and family,” a 2016 Financial Inclusion report commissioned by Access to finance and carried out by Finscope points out.

Some industrial players believe high competition in the commercial banking could have informed CBA to explore new opportunities in microfinance.

“Obviously all of us want bigger market share but there is not much. The problem is that when banks remain small they get a smaller market share of deposits that means investors in these banks cannot bring in more capital because capital would be idle,” said Hannington Namara CEO and managing director Equity Bank Rwanda.

Mr Namara recommends more partnerships, acquisitions and mergers are recommended to finance to attract capital for big projects.