The Development Bank of Rwanda (BRD) has launched a countrywide outreach campaign to identify potential bankable projects in priority sectors. The campaign, which started in Nyamata, Bugesera district, seeks to provide loans to local investors in education, agriculture, energy, housing, exports and special projects and infrastructure.
To implement this strategic plan, BRD has earmarked $707.3 million which is accessible by commercial banks and savings and credit cooperatives (SACCOs) while the government, the Private Sector federation (PSF) and the Rwanda Social, Security Board (RSSB) will oversee the implementation of this plan.
“The aim of this campaign is to meet investors with ongoing projects and those with project proposals to see how we can help them develop and thus increase their contribution to national development,” said Livingstone Byamungu, the Chief Investment Officer at BRD.
He said that BRD’s meetings with investors are a platform for the bank to explain new opportunities that help investors grow their businesses.
The chairman of PSF in Bugesera district, Eugene Higiro, thanked BRD and said the investment fund will promote the private sector in various ways and help the business community contribute towards national development, while Eric Ruzindaza, the vice-mayor in charge of economic affairs in Bugesera district, urged people to seize the opportunity and use the loans at a favourable and attractive interest rate.
The outreach campaign ends in January, and will cover all the districts in conjunction with PSF and district leaders. The credit will be available next year.
“Usually we make our budget in October and we use the rest of the year to identify potential projects to include them in our next financial year,” Byamungu explained.
He also made it clear that BRD does not only target big investors, but that small and medium entrepreneurs have equal opportunities to access the bank’s credit either through the commercial banks or SACCOs. He observed that while BRD in general targets projects worth Rwf 50 million and above, even investors who require less money can have their projects considered through the commercial banks. The investor should however be able to finance at least 30% of the project cost himself.
BRD will channel it credit through Bank of Kigali, I&M Bank, BPR and SACCOs.
The funds will be allocated to key priority sectors with export development taking the lion’s share with $222m, followed by energy with $185m, agriculture financing at $170m, affordable housing at $66.3m and education financing at $64m.
However, Byamungu says that BRD will also finance other infrastructure that is considered as social goods – such as clinics and hospitals, markets, furniture and welding centres, factories for construction and building materials.
Talking about the purpose and source of the fund, Dr. Byamungu said BRD partners with the government to accelerate development in the priority areas in alignment with other government strategies to fast-track the national strategy for transformation and prosperity (NSTP 2018-24).
The fact that export development gets most funds shouldn’t surprise, as it is a way of supporting the ‘Made in Rwanda’ campaign to greater heights.
“For the export promoting programme, we’ll use the Export Guarantee Fund to lend to commercial banks at an interest rate of 8%, and the banks in turn should not charge more than 14%,” Byamungu explained.
To support government’s rural electrification programme ‘Bye Bye Agatadoba’ BRD will lend to commercial banks and SACCOs at an interest rate of 5% through the Renewable Energy Fund, while the actual projects will be charged 9%.
Apart from its responsibility of managing student loans and allowances for students in institutions of higher learning studying in Rwanda and overseas, BRD also supports education by giving loans to private school investors.
“If say they want money for purchasing instructional materials [school text books], construction of a library or a science laboratory, and even for expansion of the school premises or a facelift to the school, we have that money,” Byamungu remarked.
He reiterated the bank’s commitment to finance any project aimed at enhancing access to and quality of education in Rwanda. Private investors in Technical and Vocational Education and Training (TVET) also stand a high chance of attaining BRD’s education loans.
In support of the government’s programme of increasing access to affordable housing, BRD also has credit for the construction or purchase of modern houses, especially in the Rwanda’s secondary cities and the city of Kigali. According to Byamungu, the houses that will be constructed in accordance to the master plans of those cities will cost between Rwf 25m and Rwf 40m.
BRD seeks to promote affordable housing based on the twin pillars of mortgage finance and production of bankable housing, focusing on short, medium and longer term market interventions to address challenges in housing finance in Rwanda. They are hopeful that such interventions will address the current deficit of about 34,000 units per year, especially in the affordable range by investing in land banking and availing construction loans to developers.
The objective of supporting housing financing (demand side) is to address the existing pitfalls in the mortgage market notably high interest rates, short tenancy and limited liquidity. This will be done by scaling up and standardization of mortgage underwriting as well as setting up alternative off take vehicles such as MBS, REITs and Rent-Own schemes. It is important to note that in June 2017, the Cabinet approved the affordable housing finance fund that will be managed by BRD.
A great deal of effort will be made to promote mining and domestic industry in general to promote Made-in-Rwanda initiatives and the government’s import-substitution programme. Tourism and agri-business like tea, coffee and horticulture can also access the BRD’s export fund.
Under the Export Growth Facility, the Department of Export Financing in BRD manages the fund which aims to foster SMEs active in the export sector through three separate but interlinked components: the Investment Catalyst Fund to encourage private sector investment in exports through subsidized loans at 10% interest per annum; the Matching Grant Fund to promote penetration into external markets by offering financing of up to 50% of total project cost not going beyond $100,000 in funding; and, the Export Guarantee Facility to enhance credit worthiness of exporters (mainly short term) by providing guarantees of up to 80% of value of goods to export.
In a bid to transform agriculture, BRD intends to provide wholesale on-lending to MFIs and SACCOs at affordable rates designated for small holder farmers as well as financing to projects in high-value crops and seeds production.
It will also finance commercial projects in livestock production, feeds, forage and fish production, agro-processing industries and post-harvest infrastructure, and support agri-vet trade finance for inputs, machinery, transport logistics, packaging materials and produce.
Read this article and more in issue n° 79 of Hope Magazine.