The war has affected
the whole banking sector. Non-performing loans represent
the main burden of the banking industry as they
represent 49.5% of banks' total portfolio. However,
this year, you are celebrating the 35th anniversary
of BRD, can you give us a brief overview of the
steps that marked the development of BRD and especially
during the transition period after the war in '94?
The high level of bad loans cumulated after the
war, which is undermining the development of the
financial sector, has had a significant impact on
our bank, especially as it is an investment bank
dealing with long term credit lines given to start-up
businesses, industries, etc. We don't have current
accounts or any other operation that can counterbalance
the high risk stemming from corporate banking activities.
Today, we finance around 40% of the country's long-term
credit economy. We finance 95% of investments directed
to the agricultural sector.
So, after '94, the bank had 50% of its portfolio
in contentious as most of our clients have been
killed, others have fled the country. The first
thing we did at that time was to turn towards the
London Club in order to help reschedule our debts.
We then helped recapitalizing the main sectors,
provided clients with longer maturity periods, we
even granted grace periods and financed some working
capital. But 2 years later, again we came up against
the same problems of bad loans due to three main
reasons:
First, our clients' incapability of getting access
to qualified human resources, financial accounts,
etc.
Secondly, since '96, the Rwandan Government has
been implementing economic reforms aimed at opening
the country. We reduced our tariffs and this impacted
on our clients that used to work in a protective
environment. Suddenly, they had to face the foreign
competition and could not even maintain their cash
flow. Also, there was the tax issue. The country
was reorganizing its tax system, which created a
lot of constraints to most of the sectors under
rehabilitation and that could not maintain their
projected cash flows.
Finally, the last aspect was the Demand. The 3 years
following the war corresponded to a period of high
demand arising from the presence of a great number
of international organizations, humanitarian aid
and you could see small businesses such as hotels
coming up, as well as in housing, transports, services.
But this was not a sustainable demand as the system
collapsed when those organizations started to leave
the country. As a result we ended up in 2000 with
a total bad portfolio of 62% out of a 6 billion
Francs portfolio (12m$).
But this did not mean that we were the most affected
bank. We used to borrow to the European Investment
Bank, the World Bank, the ADB and other bilateral
institutions and with the whole movement of liberalization
of the financial sector; even our funds that used
to be on concessional basis were no longer debt
funds. There are two elements: the cost of resources
and exchange rate risk as you borrow outside. But
the Government has accepted to cover the exchange
risk.
The main reason our bank managed to survive is because
we have always been very cautious and we have some
well-trained analysts in Financial evaluations and
risk management who help the bank mitigate risks.
Also, the bank has been provisioning a lot, even
exceeding the requirements from the National Bank.
So, year after year, we got healthier balance sheets
and the financial situation of our bank has today
reached an acceptable level considering the still
significant amount of bad loans that we have.
Would it not be interesting for you to start
getting involved in retail banking so as diversify
your revenue sources and get access to cheaper funds?
This is the current big issue. The law allows us
to enter the retail banking industry but then we
have to undergo an instruction carried by the national
Bank and limitating us to certain operations related
to long-term investment. So, we have to sort this
out first.
It is true that we could have done it in '95 when
other commercial Banks started to set up. But we
have always followed our development strategy of
investment bank. And we still believe there are
areas in corporate banking where we can provide
new services. We are actually working on the creation
of a microfinance window managed by a subsidiary.
IFAD and international donors have already shown
interest in this project as it is complementary
to our existing activities. We already have an extensive
portfolio of small and medium size companies, mostly
in the agro-business. Those companies specialize
in very specific areas of production with significant
potential, such as flower, livestock, tea, coffee
productions and we finance them. At the same time
we help thousands of families to make their living.
Also, the donors who believe in those projects come
and help the farmers with their working capital.
So, we believe there are good opportunities to seize
in that field.
However, other banks don't seem to be so much
aware or not as focused on those opportunities that
you are mentioning?
Well, I have a background related to development.
I worked 8 years for the EU in the development field,
4 years with UNDP and then 6 years at the Ministry
of Finance. So, this experience has influenced my
current decisions, but also provides me with good
contacts with some donors. Without this background,
I would not have launched such ventures, it would
have been too risky. One has to find the right way
of doing business in that field. So, if we develop
a wholesale window of micro-finance and develop
those companies creating value added, we can secure
a group of clients. When you reach 300,000 families
in a period of two years, you can then create a
real micro-finance banking. |
BRD seems the most
committed bank towards the message that the Government
is trying to convey to the banking sector, saying
that banks are the only ones that can and that have
to innovate in banking services to small and medium
size businesses…
The State has a 56% share in BRD and there is a
debate today on how the shareholding structure should
evolve in the future. However, we believe that as
a development bank we have a major role to play
in the Poverty reduction strategy, still keeping
in mind that we have to remain professional, create
wealth and not always rely on donors. So, we are
in areas where most of the commercial banks have
not ventured yet. Also, we have equity participation
in many companies such as Sowarthe (25%), Tabarwanda
(21%), Mille Collines Hotel (10%), Magerwa (68%),
Rwandatel and others.
However, do you have any plan do target large
deals?
Like any other bank we cannot commit more 25% of
our net wealth to one client. So, we can finance
today around $2m but we don't like so much large
project as you get into high trouble if something
goes wrong. We prefer mitigating risks by diversifying
our portfolio into projects with high return on
investment and possibly export-oriented such as
tea, coffee or sugar. We know that due to the background
of Rwanda, we have a problem of hard currency, so
we enter in partnership with foreign banks like
PTA banks in Kenya, IFC, the DBSA. In any case,
we would never support a large project alone.
The National Bank has introduced a new banking
law. Various measures related to banking supervision
have been implemented in order to improve management
efficiency and mitigate risks. How did you perceive
those measures and their impact on your activity?
Of course everyone has to adapt to those new measures
but I must admit that taxes tend to hinder our profitability.
Whatever we save and that we could use to increase
our reserve goes into tax and just compensate for
the cost of money, the cost of borrowing outside.
Among the good measures that have been introduced
by the National Bank is the one on minimum capital.
Commercial banks have to reach FRW1.5bn ($3m), and
investment banks 3bn, which means that today the
BRD has to double its capital by October 2003. So,
I travel very often to try finding strategic partners
and thinking on a new development strategy for the
bank, for a transition towards universal banking.
We already have all the infrastructure start in
retail banking but right now still don't believe
it would bring such a value added to our business.
We are also waiting for the National Bank to introduce
the law on leasing, which should take place in 2003.
We think there are many opportunities in that field,
such as in industrial equipment. The main question
being how can we diversify in new products and services
without duplicating what others are already doing?
Your comments give a good overview of the potentials
that exist in Rwanda. How would you describe Rwanda
as a potential investment destination as compared
to its neighboring countries?
Tourism has a huge potential. We need to invest
a lot in our building capacity, in human resources
in order to create a good service. I believe that
training people in order to improve the quality
of our human resources should be our main development
focus. With this asset and the fact that the country
is relatively small, we should be able to create
a good communication environment at all levels and
develop economy efficiently. Of course we have to
fight the image of the '94 genocide in order to
attract good investors. Even though we currently
have a lack of technical skills, Rwandan people
are hard workers, which is a great asset.
But the Government is also very supportive towards
new initiatives. BRD is currently financing a project
of production and export of roses that we sell through
auctions in Amsterdam and for which the government
has created good incentives. On a more general level,
we have to support export-generating businesses.
We also have to push for the development of the
energy sector where the growth potential is high
but still have the inconvenient of being long-term
investments. And the country cannot invest alone
as the HIPIC agreements do not allow us to borrow
above a certain limit.
You mentioned earlier that you have worked for
the EU, the UNDP, and the Ministry of Finance. Can
you tell more about those experiences and what you
have learnt from them?
I studied macroeconomics in Belgium and I remember
as I was doing an internship at the European Union,
they wanted to transfer me to the General secretariat.
And I said I want to work in development. But I
was told it was impossible, so I refused their offer.
Finally I was placed in a small division and after
that period I became a junior and learnt a lot about
successful cases where the EU had invested. So,
I decided with a friend to create our own business,
providing information to consultants who could then
get contracts for project valuations. In '88, I
worked for the EU as an expert in negotiations for
regional cooperation but then I felt I had to work
on the field and therefore I applied to work with
UNDP, which enabled me to work in Ivory Coast and
in Gabon. After '94, I got asked to come to Rwanda
to work as Director of the Cabinet of the Minister
of planning. We organized all financing programs
that would contribute rebuilding the national economy
and then became Permanent Secretary. I remained
6 years there but at the same time I was the Chairperson
of BRD and this is also one of the reasons we managed
to keep this bank afloat after the war. The link
between the bank, the Ministry of Finance and the
donors was crucial. So, in the end, I became the
MD of the is bank and I believe it is really my
background in development that brought me to this
position in this institution.
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content of unedited transcriptions. |
