BRD leading financing of key priority sectors to achieve Rwanda’s development agenda

BRD's investment in Special projects & infrastructure, 2016 (in Rwf)

As the leading financier of long-term projects, BRD is at the forefront of the emergence of strong private sector investments into the priority sectors of the Rwandan economy as enshrined in the national development agenda (Vision 2020 and the SecondEconomic Development and Poverty Reduction Strategy – EDPRS 2).

Following a restructuring that was completed last year, BRD streamlined its internal structures to improve its role as a catalyst for Rwanda’s economic development.

The bank changed its strategy, moving from being a product-based financier to a sector-based one, focusing on six key sectors: energy, housing, education, exports, agriculture, and special projects and infrastructure.

The sectors were identified as the ones that will have the biggest impact on the economic and social conditions of Rwandans, hence fast-tracking the country’s development agenda.

In this edition, we feature some of the key interventions the bank has made in all the mentioned sectors apart from education and agriculture which we will feature in the next.

Exports

Under the exports and import substitution sector, BRD’s financing seeks to enhance the growth of industries to increase production for exports and reduce the country’s imports. In 2016, BRD financed projects in tea and coffee, horticulture, manufacturing, agro-processing, artisanal mining and hospitality services.

1489146879BRD-KfW-EGF

Finance Minister Claver Gatete (L), flanked by BRD CEO Alex Kanyankole, talking to officials of the German Development Bank (KfW) which injected €8.5 million in the Export Growth Facility last December.

The bank signed a Memorandum of Understanding with the Ministry of Trade and Industry (MINEACOM) to manage the Export Growth Facility (EGF), which aims at facilitating export-oriented SMEs to access finance through interest subsidies, grants and credit insurance facilities to boost their exports.

The EGF targets exporters including SME’s, who export up to 40% of their production, with a turnover ranging between, $50,000 (Rwf 41.8 million) to $1million (Rwf 835 million). It is designed as a single facility with three windows: an Investment Catalyst Fund, a matching grant fund for market-entry related costs, and a credit insurance guarantee facility.

Last year, through the Investment Catalyst Fund, the bank approved five projects amounting to Rwf 1.1 billion, with a direct interest subsidy of Rwf 322 million. These projects are expected to trigger the injection of Rwf 3.4 billion into the economy, create 851 permanent jobs and 1,140 temporary ones as well as contribute to Rwanda’s balance of payment by Rwf 5.5 billion.

On the Matching grant during the bank approved three projects totalling to Rwf 235.5 million with a total of Rwf 471 million injected into the national economy, creating 193 permanent jobs and 2,585 temporary ones as well as contributing to the balance of payment to the tune of Rwf 3.8 billion.

Looking at increasing coffee exports, the bank financed 15 promoters to collect and process coffee cherries into green beans during the 2016 campaign.

The expected impact from the campaign is to inject Rwf 2.99 billion in the economy, create and maintain 109 permanent employments and 886 seasonal ones as well as improve the national balance of payment by Rwf 3.7 billion by the end of last month.

When it comes to promoting import-substitution products, BRD now focuses on financing projects aimed at recapturing the domestic market.

During the course of last year, the bank financed Rwf 12.8 billion in the sector, with a total of 1,173 permanent and 3,490 temporary jobs expected to be created in the next few years, hence playing vital role in reducing the country’s imports and saving the economy a lot in foreign exchange.

1489147113modern market

BRD has facilitated the construction of modern community markets.

Special projects & infrastructure

The Department of Special Projects and Infrastructure (DSPI) is one of the six new departments at BRD with a strategic mandate to support national growth through special projects outside the bank’s other five departments.

Over the next five years, BRD plans to invest a total of US$ 712 million in the economy that will trigger at least US$ 1.6 billion worth of returns into the economy and create over 180,000 jobs; the DSPI will play a crucial role in enabling the bank meet this ambitious target.

Financing from DSPI mostly covers public infrastructure such as community markets and commercial buildings, projects in the health sector and transport, ICT, water and sanitation, as well as other strategic projects where the government needs financial institutions to come in and bridge the gap.

For the year 2016, the department surpassed the year’s targets, as shown in table 1, with an annual investment of Rwf 28.6 billion, which is 191% of the target.

Table 1: Investment in Special projects & infrastructure, 2016 (in Rwf)

 

Total Performance

Target

 

Manufacturing

     8,295,507,063

     3,944,500,000

210%

Commercial and Hotel

   10,333,347,713

     5,578,650,000

185%

Transport and Warehousing

     4,136,247,830

     2,434,320,000

170%

Service

     5,870,653,246

        619,850,000

947%

Total by  sectors

   28,635,755,852

   15,000,370,000

191%

 

In 2017, the department is determined to take on more projects to boost the economy.

A number of projects have already been lined up for funding, including Batsinda Modern market; a 7-storeyed shopping mall located in Kinyinya Sector, Gasabo District; a five-storied commercial building in Kigali; a 4-level commercial market in Rusizi; construction of BAHO Clinic complex and Kabuga Taxi Park; the purchase of a new bus fleet for RITCO transport company; and a commercial building in Rusizi by motorcycle cooperative COMORU.

Affordable housing

Affordable housing continues to be a priority for BRD’s financing following a 2012 study that indicated a very high housing market demand which requires national efforts and quick interventions especially for the city of Kigali.

The study showed that Rwanda needs more than 344,068 housing units by 2020 to be able to meet the growing demand. At least 34,000 housing units on average per year must be constructed to meet this demand.

1489147179BRD-Shelter Afrique

BRD in 2013 received a credit line from Shelter Afrique to boost its long term on-lending to individual mortgages as well as private real estate developers in Rwanda.

BRD is therefore working to promote affordable housing based on the two pillars of mortgage finance and production of bankable housing, by focusing onboth short, medium and longer term market interventions to address the challenges of housing finance in Rwanda.

In its strategic plan 2016-2020, the bank will inject US$ 267 million to achieve its objective of providing affordable housing through housing finance mechanisms to spur mortgage lending.

Some of the projects in the pipeline include Kagarama and Zinia Apartments, Rugarama Park estates and the Ndera Affordable Housing Project, as well as housing development in the six secondary cities of Muhanga, Rubavu, Huye, Nyagatare, Rusizi and Musanze.

So far, the bank has embarked on the construction of 2,900 housing units with its staff being specifically trained in real estate project finance.

In addition, the bank introduced Land Banking, a facility that will see up to 57 hectares of land in Kigali used to develop 4,950 housing units in Kimisange, Ndera and Busanza Sectors.

The bank is also engaging Moroccan investors in the Ndera and Millenial on Kimisange projects.

Top of its priorities will be to continue to attract other potential investors in real estate development, identifying affordable building systems and technologies, setting up at least two housing finance vehicles that will guarantee the off-take a rental housing company/mortgage re-finance entity, accessing affordable housing incentives and building capacity for BRD staff and local real estate developers in critical skills.

Energy

BRD is committed to support the Government’s targets for electricity access to all Rwandans.

In 2016, the bank financed seven projects in the energy sector with a total of Rwf 32.3 billion that will lead to the addition of 97 MW to the national grid in the short term.

BRD’s interventions have been designed to address key constraints in the sector such as high start-up costs and risks involved. Energy projects require significant time and financial investment, and their long-term nature requires specialized financing terms.

These interventions are grouped into three main programs; energy generation, energy efficiency and technical assistance. In energy generation, the bank has financed hydro-power, bio-mass and peat-based energy projects and methane-gas plants.

In collaboration with private sector players ready to invest in the sector, BRD not only finances the construction and completion of power plants but also provides technical skills in the early stage, development support, management and operations, and structuring of energy deals with the government.

 

Read this article and more in the latest issue of Hope Magazine

  • By Rwanda Development Bank
  • Posted 10th March 2017

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