Rwanda’s financial sector is composed of a wide and growing array of institutions, and is becoming increasingly diversified, metamorphosing into a stable sector bringing along the associative benefits of; maintaining confidence of the public; creating an adequate environment for economic financing; attracting investors; mitigating systemic risks of financial sector and avoiding the likely costly consequences of financial institutions’ failures.
The dynamics in Rwanda’s economic transformation have been a function of discipline, following the macro-economic principles and implementing the micro-social and economic strategies that have seen the small economy stabilising into resilience despite the regional and international financial and economic volatility.
The National Bank of Rwanda has, especially, played a pivotal role in ensuring low and stable inflation and macroeconomic stability. Inflation has generally been contained below the medium term objective of 5%, standing at 4.0% on average. As a result, broad money supply and deposits in the banking system increased on average by 17% and 18% respectively, while both outstanding credit to the private sector and new authorized loans grew by 20%.
This upward trend in these key monetary aggregates implies sufficient financing of the economy, which added to price stability, in contributing to the good economic performance with GDP growth averaging 6.9%, mostly reflected in the service sector.
Expansion of financial inclusion has continued to be a strategic objective in the financial sector, with geographic access of banks’ network outside Kigali standing at 60%, while the growth in bank agents (from 198 in 2012 to 4,499 as at end March 2017) has been particularly impressive and continues to considerably increase the density of bank outlets.
Such expansion means formal transactions are building up, growing the taxable base, customers are now capable of accessing bank credit and making investments that fit in their economic perspectives. Besides, other innovative banking services like digital financial services have been introduced on the market and are proving to be great drivers of financial inclusion to many Rwandans.
Rwanda’s banking sector appears to be sound on a system-wide basis, based on typical stability indicators. What requires more emphasis today is financial literacy, building and spreading a critical set of knowledge in entrepreneurship and formal transactions, to beef up the contributions of micro-economic players that will eventually feed into macro-economic vitality.