The rationale and impact of Banques Populaires transformation from a cooperative to a commercial bank

II 6 ACCESSING FINANCIAL SECTOR DEVELOPMENT IN RWANDA

Rwanda's financial sector is comprised of a central bank, eight commercial banks, several foreign exchange bureau, a stock exchange market, as well as microfinance institutions. Commercial banks account for over 75 percent of total deposits. The financial sector development plan of the Government of Rwanda aims at addressing four main weaknesses in the financial sector: access to finance, capital market development, regulation and supervision of non-bank financial institutions and the development of payments systems(FSAP Paper 2005).

Financial sector reforms in Rwanda started in 1994/95 with the establishment of five new banks after the war. Overall, Government has been cautious in its efforts to undertake financial sector reforms. Among all these aspects of reforms mentioned above, the main areas of reform focused on strengthening prudential supervision and regulation of the financial sector. 80 percent of «Banque Commerciale du Rwanda» were sold to foreign investors in 2003/04. The National Bank of Rwanda also started comprehensive annual inspections of banks in 2004. In an effort to support the mobilization of long-term savings, the Rwandese Government has set up a Working group to spearhead the establishment of the Rwanda stock exchange project in June 2004. The stock exchange was eventually established in January 2007 (FSAP Paper 2005).

As regards the current state of the financial sector reform, it was noted in the statement of the IMF Staff Representative at the Rwanda Donors' meeting in Kigali, November 26-27, 2007 that the Government of Rwanda had developed a comprehensive and detailed «Financial Sector

Development Plan» (FSDP), based on the 2005 Financial Sector Assessment Program (FSAP), which the Government had submitted to the donors in May 2007. The plan for the financial sector reforms focused on five main areas:

(i) Building financial sector infrastructure (e.g., legal framework);

(ii) Increasing access to finance (notably in the rural and SME sectors);

(iii) Building capital markets;

(iv) Strengthening the pension and insurance sectors; and

(v) Developing the payments system. (FSAP 2005)

II 7 1 UBPR TRANSFORMATION FROM A COOPERATIVE TO A COMMERCIAL BANK UNDER RABOBANK : HISTORICAL PERSPECTIVE

The National Bank of Rwanda (BNR) licensed Bank Populaire, a highly successful local savings and credit union with 148 branches nationwide into a fully-fledged commercial bank in January 2008. The decision was part of a wide range of recommendations by a team of consultants hired to advise BNR on the financial sector reforms.

Banque Populaire had the largest bank depositor base of over 500,000 clients. The Banque Populaire was just a union of cooperative savings and had some limitations such as inability to offer a full range of financial services and so on (East African Business 2008)

II.7 2 RFID INVESTS FRW 6.5B INTO BPR

In 2008 Rabobank acquired a minority share of 35 percent in BPR, to share up and shape the long-term cooperation by means of management and support. The customers of BPR become the shareholders, confirming once more its grass roots in Rwanda. This eventually enabled both BPR and the economy of Rwanda to take a major step towards of financial services. The network of credit unions at BPR has a number of unique features. It is by far the country's largest provider of financial services outside the urban areas. It bears a cooperative signature based on Rabobank's principles and is now considering the choice between becoming a fully-fledged retail bank, thereby meeting widespread demand, or continuing to work as a purely member-based cooperative. Facilitated by Rabo Development, a strategy has been devised to retain the strengths of the cooperative structure while benefiting from its transformation into a one-tier, one-stop shop for financial services ( www.bpr.com).

Building on the strategic outline that BPR has now embraced, an extensive technical assistance programme has been designed to build the products, provide the desired channels (including ATMs and mobile banking) and serve all customers, not just members. The fact the former members became shareholders of BPR, it became a unique bank owned by over 500,000 shareholders and offering full banking services while maintaining its cooperative features. Rabo Development has become a strategic investor as a fully-fledged bank. It organizes the expertise required to restructure the bank and provide management services as well as board members and hope to become a leading bank in Rwanda that will reach out to rural parts of the country ( www.bpr.com).