Banks in Rwanda are considering significant increases to user fees as income earned from interest decreases. However, this proposal has attracted a backlash from consumers who complain that they are already paying too much in user fees.

The bankers plan to double fee-based revenues from the current levels. On average, banks in the country generate 20 per cent of their revenue from fees and commissions — a level they say is low compared with banks in Uganda, Kenya and Tanzania, who earn as much as 45 per cent from fees.

“When you look at interest income, banks cannot survive. In the coming years I foresee bank services fees increasing,” said Maurice Toritich managing director of KCB Rwanda.

Mr Toroitich who is also the chairman of the Rwanda Bankers’ Association was reacting to claims of high user fees by clients.

Bankers say the challenge of operating in Rwanda is that user fees are over-subsidised either by the government or the banks themselves as they try to attract new clients and retain new ones.

The government has scrapped most taxes on fees to keep them low and encourage the public to adopt digital banking as it pushes for a cashless economy and promote a savings culture. Internet and mobile banking in Rwanda is VAT exempt.

The banks are also subsidising on cost. For instance while on average, a cheque leaf in Uganda costs Rwf800, in Rwanda it is Rwf500 per leaf.

Robin C Bairsaw the managing director at I&M Bank Rwanda said any increase in user fees will be transparent and controlled by regulation.

But he added that banks consider user fees and commissions as the next profit frontier.

“Banks all over the globe are looking at alternative revenue streams and saving on costs by introducing new products and services to retain existing customers and attract new ones. This is no different in Rwanda,” he said.

Mr Bairsaw’s comments come as banks in Rwanda invest in digital and electronic banking services, while others like Ecobank Rwanda offer bancassurance services and microloan services in a bid to diversify their revenue sources.

Commercial Bank of Africa and KCB Rwanda have partnered to roll out mobile-banking and virtual banking products using MTN’s mobile money platform. The banks earn a commission for facilitating the transactions.

Industry players say the subsidies the government offers have helped the country attract investors in the financial sector.

But, consumer rights lobby groups said clients need to be protected against the high fees and commissions that banks charge them.

“We get many complaints about abuse of consumer rights by banks through unexplained fees,” said Theodoric Uzaburaho president of the Rwanda Consumer Rights Association.

Clients have complained about the costs they incur especially for accessing their accounts or for receiving SMSs about their transactions.

But, keeping user fees low when operational expenses are increasing has become untenable for bankers because for two years they have posted reduced earnings.

Data from the National Bank of Rwanda for January-June 2016 shows the banking industry net profit dropped to Rwf19.4 billion from Rwf23.6 billion in 2015.

The fall in profits reduced return on assets and return on equity to 1.7 per cent and 9.2 per cent respectively, compared with return on assets of 2.4 per cent and return on equity of 13.1 per cent in the first six months of 2015.