Financial Service Penetration

Rwandan financial sector has few players with most of the commercial banks branch network concentrated in Kigali City. The banks operations are centered on trade finance. The commercial banks are offering limited long term debt financing for the development of major projects in Rwanda. The lack of local long term financing has in away slowed down the development of projects which are beneficial to the country. There is therefore an urgent need to focus attention on reforms in the financial sector with the aim of stimulating long term financing from commercial banks.

In 2012, about 1.3 million adult Rwandans did not have access to formal financial services which mean that financial service penetration stands at 28.1% as compared to 30% for Uganda, 33% Kenya and 56% for Tanzania.

The challenges include the following;

  • Poor infrastructure more especially in rural areas has hindered the financial service penetration.
  • Poor credit culture has been attributed to the influx of donations after the 1994 conflict and this has led to low financial penetration in the country.
  • Limited institutional capacity is another challenge hindering the financial penetration in Rwanda.
  • Poor loan quality and high non-performing loans remain a challenge for the Rwandan financial service institutions.
  • Financial exclusion is a major limitation of financial service penetration within the country.
  • A number of Rwandans borrow from an external source hence limiting the growth of the local financial sector.

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