Kenya, Rwanda boast over 20% return on assets in banking sector- Central Bank Governor

Rwanda and Kenya are the only countries in the region with a return on assets well above 20 per cent, Rwanda Central Bank Governor John Rwangombwa has revealed.

Speaking during the presentation of the Monetary Policy and Financial Stability Statement (MPFSS), Rwangombwa said the Rwandan banking sector saw significant growth in the first half of 2024, with net profits rising by 36.7 per cent to Rwf132.5 billion (Sh12 billion).

“This is a good indication that our banking industry is attractive to investments. It is good business but also contributes to the general performance of the economy,” Rwangombwa said as quoted by the New Times of Rwanda.

Kenyan banks with operations in Rwanda have particularly benefited from the country’s economic environment.

In May 2023, the Central Bank of Kenya reported that regional subsidiaries recorded an 88.65 per cent increase in profit before tax, reaching Sh32.51 billion ($237.29 million), up from Sh17.23 billion ($125.76 million) in 2021.

A significant 31.26 per cent of the earnings came from Rwandan subsidiaries.

Kenyan banks currently operate 133 branches in Rwanda, with KCB leading the pack with 84 branches, followed by Equity Bank (16), NCBA Group (5), I&M Holdings (14), and Guaranty Trust Bank (14).

The Rwandan banking sector's return on assets (ROA) grew by 4.9 per cent, while return on equity (ROE) increased by 21.8 per cent.

The sector’s total assets also expanded, reaching Rwf7.8 trillion, with the banking industry accounting for 67.5 per cent of total financial sector assets.

Namara Hannington, Managing Director of Equity Bank Rwanda, highlighted the opportunities within the agriculture sector, noting that collaboration between banks and insurers could help finance underserved economic sectors.

"This would promote economic activities and boost growth while providing business for the insurance sector as well," Hannington said.

The manufacturing sector also attracted significant new loans, with Rwf47.3 billion (Sh444.9 million) issued in the first half of 2024, accounting for nine per cent of total new authorised loans.

However, CEO of Bank of Kigali Diane Karusisi, pointed out that while manufacturing firms have been key drivers of banks, they have also contributed to an increase in non-performing loans, particularly newer companies involved in the Manufacture and Build to Recover program.

Overall, Rwanda's financial sector continued to perform strongly, with total assets growing by 18.3 per cent to Rwf9.6 trillion by June 2024, compared to Rwf8.1 trillion in June 2022, largely driven by the banking sector.