Bank of Kigali has launched BK TecHouse, a technology solutions company, reinforcing the listed lender’s diversification drive as it seeks to spread risks and tap into new income lines.

BK TecHouse provides IT solutions in banking, education, agriculture and health. The technology solutions company is expected to create new business opportunities for the bank, whose profit after tax grew marginally to Rwf20.8 billion ($25.2 million) last year, from Rwf20.5 billion ($24.8 million) in 2015.

BK blames the marginal growth on increasing competition.

BK TecHouse CEO said that having a Rwandan player in the digital space is set to boost financial inclusion and promote cashless transactions with the potential it could be exported abroad.

The digital solutions company is the fourth subsidiary that BK has launched since 2013, and the second this month following the commissioning of insurance firm Bank of Kigali General Insurance (BKGI), on March 16. In 2013, the lender launched BK Custodial Services and brokerage services firm BK Securities.

However, the contributions that the subsidiaries make to the general income of the group have remained marginal.

Management said that diversifying business will help the lender retain customers as it will create more value for them by enhancing convenience and the quality of their everyday lives beyond mere transactions.

BK chief executive Diane Karusisi said: “We don’t want to be Kodak that got disrupted by digital photography or the taxi conductor whose role is being disrupted by digital card tap and go payment solutions; even the driver is not safe as technology explores the viability of driverless cars; we want to be part of the change.”

Bank of Kigali hopes its insurance wing will rope in some 300,000 account holders to insure with the lender. BK is betting on its large customer base and wide branch network to offer insurance services to Rwanda's untapped market.

“We have done sufficient surveys so we are coming in knowing the issues dogging the sector. I know some players are facing a number of issues and the sector currently suffers a high rate of unpaid claims, but we are just starting out and it serves us well to know all this at the beginning,” said Alex Bahizi, the CEO of BKGI at the official launch.

READ: Bank of Kigali insurance seeks to shake up sector

The lender is courting a Mauritian company Aprica investments Ltd which has more than 160 years experience in insurance business to buy a 30 per cent stake in BK General Insurance.

BK Custodial Services on the other hand has boosted the banks’ fee revenues through investment advisory services while BK Securities has done so by offering stock broking services and other capital market financial services.

“Diversifying business into a one-stop financial services centre has helped the bank remain profitable and attractive to clients at a time of growing competition from Kenyan subsidiaries including KCB, Equity Bank, I&M Bank and the Pan African bank, Ecobank,” said Davis K Gathaara, an investment advisor.

Data from National Bank of Rwanda shows that assets of Rwanda's banking industry dropped by 11.5 per cent at the close of December 2016, to about $2.5 billion from $2.8 billion in December 2015

“The slowdown of domestic demand in 2016 affected business earnings and reduced their demand for credit to expand their businesses. The total amount of loan applications received by banks declined from Rwf937 billion in 2015 to Rwf861 billion in 2016,” National Bank of Rwanda February 2017 Monetary Policy and Financial Stability statement notes.