The $21 million acquisition of a majority stake in Bank Populaire du Rwanda (BPR), and its proposed merger with BRD Commercial, has raised expectations of increased competition in the financial sector but is unlikely to put downward pressure on interest rates.

London Stock Exchange-listed Atlas Mara started by buying 45 per cent of BPR, after which it also transferred BRD Commercial, which it acquired fully last year to get a holding of 62 per cent in the new entity. This has led to dilution of shares held by other shareholders, giving Rabobank 15 per cent and local shareholders 23 per cent.

Sanjeev Anand, formerly the managing director of I&M Bank, has been appointed the CEO of the combined entity which will continue trading as BPR.

The bank is expected to benefit both in terms of capital and expertise from the contacts of Atlas Mara co-owner Bob Diamond, a former Barclays Bank Plc chief executive.

The merger makes the combined entity of BPR Rwanda’s second largest bank by assets, estimated at $325 million. It will also have the largest number of branches in the country.

READ: Rwanda banks merger takes Atlas Mara near the top

“We are strong on capital, we have mobilized over $700 million of equity capital and hundreds more from development finance institutions, this bigger capital pool will be of great benefit to BPR and the market in general” said John Vitalo, Atlas Mara group CEO.

Maurice Toroitich,  managing director of KCB Rwanda, praised Atlas Mara’s entry as a positive development. “There is going to be bigger competition which will of course ensure better pricing. It’s a bigger bank and the competition it brings into the market will be good for the customers” he said.

However Toroitich said there would be minimal effect on the reduction of interest rates.

“Banks operate in an economy, for interest rates to go down, it means that the financial system needs to have a larger capital pool, capacity to raise foreign capital into the market.”