Equity, KCB expansion into Rwanda a win for customers, but a threat to local banks

Saturday September 04 2021
A Banque Populaire du Rwanda

A Banque Populaire du Rwanda (BPR) banking hall. The Rwandan lender was recently acquired by Kenya’s KCB Group. PHOTO | FILE


Big banks in Rwanda face growing competition from recent acquisitions of local banks by regional lenders, which is good for customers.

The recent acquisition of BPR Atlas Mara by KCB group to form BPR Bank will shake up competition in the Rwandan financial market, and push existing big players to innovate loan products as well as other retail services.

The continued expansion into the Rwandan market by Equity and KCB — two leading Kenyan banks — means the big, local banks like market leader Bank of Kigali and BRD will face stiffer competition in financing big investment projects in the country.

A combined balance sheet of BPR Atlas Mara and KCB Rwanda will mean BPR Bank will be strong enough to expedite big investments projects without even requiring capital reinforcement.

“I don’t think the merger will complicate anything in the market in terms of competition, but their combined strength will make the new bank stronger, it is good for the market to have banks with big balance sheets and this is what the merger brings,” said Hannington Namara, the Equity Bank managing director.


In terms of how this will reflect on the competition for investment projects in a relatively smaller economy, Namara said this would not change much since both banks were in the market in the first place.

“There is enough for everybody in the market, nothing big will change, except that now there is more they can do locally together without tapping into the parent company’s resources,” he added.

The expansion and growing importance of the two Kenyan lenders in the Rwandan market and economy over the years, has been progressively diluting Bank of Kigali’s monopoly for government projects, with Equity and KCB starting to take a share of these deals.

A few years ago, when The Marriott hotel critically needed a lender to get it out of a difficult phase, Equity stepped in and invested. This put the bank in the government’s good books because the country needed a big hotel in its nascent hospitality industry.

Equity took the market by storm with its agency banking model, which enabled it to grow its retail business faster — a model that has since been adopted by other banks in the market.

KCB also came on board to invest in the completion of the Kigali Convention Centre, a project that had stalled. This saw the government start giving deals to the bank and tenders to contractors working with KCB Rwanda.

“We have been encouraging our customers to tender for government projects, we then finance them to execute these projects and they pay us when the government settles their invoices. These projects are mainly infrastructure developments like schools, roads repairs, water supply among others” said George Odhiambo, the managing director of KCB Rwanda.

Sources intimated that plans are underway for Equity to set up its regional headquarters in Rwanda, where it will construct its own tower offices. The building will also host the Kigali International Financial Centre.

The total assets of all the 13 banks in Rwanda grew by 23.6 percent to Rwf4,501 billion ($4.5 billion) in May, however financial analysts think that the country’s financial market is still too fragmented to live up to its expected impact on the economy.

“A market like Rwanda needs four big banks if we are going to become a financial hub.

‘‘There should be more acquisitions, its taking long but it is what will eventually happen,” said Konde Bugingo, a financial sector expert.