Tue dole of National Bank of Rwanda from 1995 to 2010

DECLARATION

I Paterne RUKUNDO, hereby declare that this dissertation entitled «the role of National bank of Rwanda on Rwandan economic development» is my own work and it has not been submitted anywhere for the award of any degree.

Signed...........................................................

Paterne RUKUNDO

DEDICATION

To the almighty God for his blessing,

To my parents with my whole family for their endless affection,

To my brothers, my friends and beloved

Relatives,

I dedicate this dissertation.

ACKNOWLEDGEMENT

I would like first to acknowledge and thank Almighty God for loving and blessing me since my birth until now.

I thank particularly prof. RUTAZIBWA Gerard who devoted part of his time to the supervision of this work. His invaluable guidance contributed to the successful completion of this dissertation.

I recognize my parents who cared for me since the time of birth especially during the period of abolition of bursary.

I would expend my thanks to all people and best friends, especially, Mr. Augustin NDAHAYO, Mr. Augustin NIYONZIMA, Ms Egidie NIYONSABA and their families who more contributed to the achievement of this dissertation.

Thanks go to my friends and colleagues classmates in the economic department precisely to my girlfriend Clotilde MUKAMUGANGA for making my student life enjoyable.

May God bless them in whatever they do!

TABLE OF CONTENTS

DECLARATION i

DEDICATION ii

ACKNOWLEDGEMENT iii

TABLE OF CONTENTS iv

LIST OF TABLES vi

APPENDICES vii

LIST OF ABBRAVIATIONS viii

ABSTRACT xi

CHAPTER I: GENERAL INTRODUCTION 1

1.1. Introduction 1

1.2. Statement of the problem 2

1.3. Significance of the study 3

1.4. Hypothesis 3

I.5. Objectives of the study 4

1.6. Identification of research. 4

1.7. Scope and limitations of the study 5

1.8. Organization of the study 5

CHAPTER II. LITERATURE REVIEW 6

2.1. Introduction 6

2.2. Development 6

2.3. Financial institutions 6

2.4. Financial institutions and financial system 7

2.5. Functions of financial system 7

2.5.1. Credit 7

2.5.2. Payments 8

2.5.3. Money creation 8

2.5.4. Savings 8

2.6. Financial development 8

2.7. Financial development and Economic growth 9

2.8. Formal financial sector and Economic activities 10

2.9. Semi-formal financial sector and Economy 11

2.10. Informal financial sector and Economic activities 11

2.11. Problems affecting financial development in developing countries 12

2.12. Banking institutions 13

2.13. Non banking institutions 14

2.14. Diversified firms 14

2.15. The role of financial system 15

2.16. Structure of Rwandan financial sector 16

2.17. Recent evolution of Rwandan banking sector 16

2.18. Monetary policy 18

2.18.1 Theory on monetary policy 19

2.19. Bank credit and transmission of monetary policy 21

2.20. Role of a central bank 23

CHAPTER III: METHODOLOGY 24

3.1. Introduction 24

3.2. Data collection 24

3.2.1. Sources of data 24

3.2.2. Data collection procedure 25

3.3. Data processing 25

3.3.1. Editing 25

3.3.2. Tabulation 25

3.4. Data presentation, analysis and interpretation 25

3.5. Research techniques 28

3.5.1. Documentation 28

3.5.2. Computer programs 28

3.6. Limitations to the study 28

CHAPTER IV . MODEL ESTIMATION AND FINDINGS 29

4.1. Introduction 29

4.2. Historical background of National Bank of Rwanda (NBR) 29

4.3. Mission of National Bank of Rwanda 30

4.4. Activities and Objectives of the NBR 31

4.5. Used data 32

4.6. Test for stationary 32

4.7. INTERPRETATION OF THE RESULTS 43

CHAPTER V. CONCLUSION AND SUGGESTION 45

BIBLIOGRAPHY 49

Academic course notes 50

Dissertations 50