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

II.8 FINANCIAL SECTOR CHALLENGES IN RWANDA

The rwandan financial sector faces a number of challenges; some of them are inherent to the limited access to banking and other financial services outside Kigali and the provincial towns (www.bnr.rw):

ü Commercial banks have only 38 branches and all located in major towns;

ü Insurance products are undiversified and its penetration is still very low;

ü MFI's which should play a significant role in filling the gap has been marred by a weak financial base, and inadequate management;

ü Poor saving culture;

ü Lack of long-term resources for funding investments due to undeveloped debt and equity market;

ü Inadequate capital.

ü Undeveloped Payment system infrastructure

ü Weak legal and regulatory framework for the NBFI

ü Poor quality and culture of auditing and accounting in most organisations.

ü Low level of human and institutional capacity..

II.9 THE ROLE OF THE FINANCIAL SECTOR IN PRIVATE SECTOR DEVELOPMENT

Domestic capital formation is fundamental to any country's economic development and effective financial institutions are a prerequisite. Financial sector promotes private sector development through the following pillars (www.bnr.rw):

ü Enhances savings mobilisation and efficient allocation of resources into productive investments hence increasing productivity;

ü Facilitating trade, capital flows and remittances from abroad;

ü Intermediating between savers and users of capital thus reducing transaction costs;

ü Increase the access to financial services and reduce informal sector business transactions;

II.10 POLICY GEARED TO INCREASE ACCESS TO BANKING SERVICES:

Accessibility of financial services is one of the prerequisites for a country to boost and ensure its sustainable development, the following are policies geared to increase access to banking services (www.bnr.rw):

ï Strengthen Banking and MFI sector through adequate capitalisation, improved regulation and Institutional capacity building through Bankers association and Umbrella MFI;

ï Establish deposit guarantee schemes for banks and MFIs;

ï UBPR to operate like a de facto commercial bank while maintaining those aspects regarding cooperative principles;

ï BHR to Issue mortgage backed bonds to raise long term capital;

ï Banks including BHR to develop mortgage savings accounts;

ï BHR to organise the property market sector, real estate evaluation;

ï Banks to continue to develop leasing products;

ï BRD to attract new equity shareholders as long as it maintains its mission;

ï Continue to raise debt capital from external sources on long term to be able to on-lend locally;

ï BRD will diversify its loan portfolio to minimise risk while investing in all targeted key economic sectors;

ï BRD to design bonds backed by good loans as a vehicle to raise more capital;

II.11 DEVELOPMENT OF LONG TERM FINANCE AND CAPITAL MARKETS

Capital market refers to that financial market where long-term funds are raised. long-term investments are needed for strengthening national economy, and this requires to be funded by long-term funds, for ensuring the sufficient supply of long-term funds the government through the central bank taken the following decisions:

ï Develop Long-term government bonds to build a yield curve by securitizing Government Debt to CSR (Caisse Sociale du Rwanda) and reissue the existing stock of Treasury Bills on a long-term basis;

ï Create a sound and facilitating environment, legal, regulatory and operational guidelines for an OTC (Over The Counter) market and for issuance of corporate and municipal bonds;

ï Establish a Capital Markets advisory council;

ï Enact the company Act and Accountants bill;

ï Facilitate creation of private pension funds and mutual trust funds by establishing a legal and regulatory framework and inbuilt tax incentives;

ï Increase penetration of CSR to include the self employed;

ï Consolidate regulation of contractual savings institution ( Insurance and Pension) into a department of BNR, specifically charged with that responsibility.( www.bnr.rw)