{ {{• Atlas Mara acquired a portion of BRD’s commercial assets and now wholly owns (100%) the newly incorporated BRD Commercial bank to carry out retail (commercial) banking activities;
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{ {{• Acquisition described as a strategic move to refocus the Development Bank’s resources on financing purely developmental projects.}} }
The Development Bank of Rwanda (BRD) has had substantial growth in the past few years in the pursuit of its mission as the development arm of the Government of Rwanda. This growth has also come with its challenges, especially the opportunity to balance development impact and profit on the one hand – including a growing commercial portfolio, and access to affordable financing for long-term development needs.
Equally, the need to respond to the priority development needs in Rwanda’s EDPRS 2 required the Bank to refocus and secure strong partnerships that would help bring long-term capital on the table. The Bank has therefore been involved in initiatives to secure such partnerships, in a bid to strengthen the focus on priorities as a development bank.
{{BRD-Atlas Mara transaction – what it means?}}
Late last year, on the sidelines of the 2014 Annual IMF /World Bank Meetings in Washington D.C, shareholders of Development Bank of Rwanda (BRD) and Atlas Mara Co-Invest put pen to paper to finalize the deal for the acquisition of a portion of the Bank’s commercial assets.
As the Bank’s Chief Executive Officer, Mr. Alex Kanyankole shared during an exclusive interview with IGIHE.com, this transaction paves way for the re-organization and refocusing of the BRD development Bank entity to aggressively and strategically increase support to the country’s development agenda by consolidating its position as the leader in provision of long-term finance to the private sector development.
“The recent sale of BRD’s commercial arm was a strategic measure other than anything else. The bank’s shareholders wanted to ensure that it concentrates on its main mandate of financing Rwanda’s development, hence the decision to let go of the commercial side to another partner who would have the required skills and offer undivided attention to growing it further.” Kanyankole said.
The assets included in the transaction consist of the Commercial Banking subsidiary (recently incorporated to run the Development Bank’s commercial loan portfolio), the BRD Insurance brokerage firm, and a piece of commercial plot adjacent to the BRD premises in central Kigali, the Rwandan capital.
That means, as Kanyankole explained, that the Atlas Mara fully owned and managed BRD Commercial Bank Limited – that is yet to receive an operational license – will in the near future invest in increasing its branch network to enhance financial inclusion, and thus operate as any other commercial bank in Rwanda would, taking deposits and capable of engaging in transactions such retail banking products, insurance, and asset management among others, that a Development Financial Institution would ordinarily be restricted from given its charter.
Kanyankole further expressed optimism and satisfaction in having on board a strategic partner, Atlas Mara which he believes will enable the Bank to leverage on their vast experience and expertise to best position the development bank so as to meet its mandate.
{{Excerpts (short extract) of the Interview:}}
During the interview with IGIHE.com, Mr. Kanyankole shared more insight into the bank’s refocused priorities, and what Rwandans should be looking forward to.
{{IGIHE}}: {Broadly, what changes in terms of management of the institution have come up as a result of the acquisition? For instance, do both the commercial and development arms answer to the same Board and overall management or is there change in the shareholding structure? }
{{Kanyankole}}: What changes is just that the commercial subsidiary of BRD has been sold off to another institution and will thus be run as a different entity. By virtue of this statement, there is no avenue for both institutions to mix up, because each is owned separately and by different shareholders.
The current shareholders of BRD will retain their shareholding in the Development Bank entity; newly refocused on targeting and financing priority sectors of the economy as set out in EDPRS II.
The Bank will also remain under the leadership of the Board of Directors as well as the entire Management team. For the commercial side, it is fully owned and managed by Atlas Mara Co-Nvest.
Atlas Mara has appointed its own management team headed by Mr. Konde Bugingo and after obtaining the Central Bank’s license will go on to recruit its own staff.
The other fact that is worth mentioning however is that based on the Management Services Agreement that we have with Atlas Mara, they will provide technical assistance such as helping BRD Ltd secure long-term finance to invest in the EDPRS II priority sectors; bringing on board strengthened management capabilities; ensuring that BRD delivers on its development mission among other management support services.
{{IGIHE}}: {Now that the institution is refocused on pure developmental agenda, what should Rwandans look forward to in terms of access to credit for instance, which sectors do you see the institution focusing on?}
{{Kanyankole:}} Like our mandate requires, our focus will still be on priority development sectors as stipulated in the second phase of the Economic Development and Poverty Eradication Strategy (EDPRS II) which will mainly feature financing affordable housing projects, export promotion, energy, infrastructural development, mining, education and agriculture.
But as part of the refocusing, we have already hired the services of a consultancy firm to develop a five year strategic Plan (2015-2019) which will best streamline what we need to do in order to achieve our set goals.
{{IGIHE:}} {With the Commercial side detached, will this not affect your profitability and hence the ability to acquire resources to efficiently finance development programs? Also shed some light on the BRD’s performance in 2014.}
{{Kanyankole:}} The commercial side constituted a small part of BRD’s total portfolio (about 30%), and since we were not fully engaging in commercial services like other banks or if you wish like the new BRD commercial entity will do, most of our profitability and resources were within the development section.
However to buttress our resource mobilization, strategies are being thought out in the process of constructing the five year strategic plan and this among others will see BRD diversify its sources of finance; from largely traditional channels like credit lines from other DFIs (which we will of course continue and strengthen) to include other contemporary sources of finance available in Rwanda.
For instance in the near future, Rwandans should expect to see us on the capital market, issuing products such as corporate bonds, but all this will be informed by a comprehensive and intensified resource mobilization strategy that will look at both local and international sources of finance.
With regards to the Bank’s performance, 2014 was a good year with significant improvements compared to the preceding year.
Although the final figures for the year’s performance are still subject to external audits which are underway, we estimate that the bank scored a net profit in the range of Frw3.5 billion, injected Frw60 billion in authorized investment loans into the economy, while at the same time managed to keep non-performance rates in the loan portfolio at the lower end, 5.35%.
Thus despite the time spent on the Atlas Mara acquisition of the commercial side of BRD, we managed to keep on track with our targets and in most scenarios exceeding earlier projections.
In 2015, BRD is planning on increasing its authorized loan portfolio to see that at least Frw65 billion is injected in the economy, to finance private and public projects that will see the country attain its aspirations as indicated in the Vision 2020 and in EDPRS phase two.
{{Fact file:}}
• 23rd May 2014, the shareholders signed a Framework Agreement with Atlas Mara which set out the separation of the commercial Banking Portfolio from the assets of the Bank, and the creation of a Commercial banking subsidiary that was eventually acquired (100 percent) by Atlas Mara.
• In addition, Atlas Mara and BRD signed a ‘Management Services Agreement’ in which Atlas Mara will leverage on its proven experience to primarily support the Bank to secure long-term finance to invest in the EDPRS II priority sectors as well as bringing on board strengthened management capabilities.
• The shareholders of BRD will remain in control of the Bank which will continue to be under the overall management of the Board of Directors led by Mr. Francis Mugisha, and a management team headed by the Chief Executive Officer, Alex Kanyankole.
• The Development Bank will continue to remain a development finance institution dedicated to being the leader in long-term finance to private sector that finances the nation’s development objectives with a focus on the priority sectors of the economy such as export promotion, refinancing, infrastructural development, energy, and agriculture.
• Atlas Mara Co-Nvest Limited was formed by Bob Diamond, Founder of Atlas Merchant Capital LLC and Ashish J. Thakkar, Founder of Mara Group Holdings Limited, and listed on the main market of the London Stock Exchange in December 2013.
• Atlas Mara’s strategy is to create sub-Saharan Africa’s premier financial institution through a combination of its experience, expertise and access to capital, liquidity and funding and to support economic growth and strengthen financial systems in Africa. For more information, visit the Company’s website at www.atlasmara.com.
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