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.
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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.
NOTE: WINNE cannot be held responsible for
the content of unedited transcriptions.
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RWANDA
