Auctions cause jitters in Kigali
Tuesday August 17 2021
The first scare for the industry was in 2015 when more than 100 hotels were lined up for auction after defaulting on their loans. PHOTO | FILE | NMG
Banks in Rwanda have run out of patience with their borrowers, with some hotels now put up for auction even as the coronavirus pandemic continues to keep guests away and further dampen the sector’s recovery prospects.
Two prominent hotels in Kigali, Hotel Portofino and The Mirror Hotel, were this week listed on a collateral auctioning platform by the Development Bank of Rwanda, setting off panic waves throughout the industry.
The lender said that the two hotels have non-performing loans that predate the pandemic by two years. One of the hotels had even found a buyer, but the deal did not work out.
Servicing loans
Most of the hotels servicing loans were given moratoriums and grace periods by their banks, adding to the lenders’ risk of accumulating non-performing loans (NPLs).
Data from the Rwanda National Bank shows that the banking sector's NPLs ratio grew to 6.6 percent in March 2021 from 4.5 percent in December 2020, and 5.5 percent in March 2020.
The NPL ratio in the micro-finance sector grew from 6.7 percent in December 2020 to 7.7 percent in March 2021.
This negative growth was attributed to a surge in bad loans registered in the hotel industry, which grew from 4.5 percent in December 2020 to 10.9 percent in March 2021, and in commercial real estate, which grew from 7.5 percent to 16.7 percent.
The first scare for the industry was in 2015 when more than 100 hotels were lined up for auction after defaulting on their loans. Some were auctioned while others were salvaged after the government intervened.
Rwanda has been a beneficiary of Mice (Meetings, Incentives, Conventions and Exhibitions), which helped give some stability to the sector.