{The National Bank of Rwanda says that much as they realize that interest rates in Rwanda are high and slow down private local investments, they cannot superimpose a ruling rate as it is determined by market forces. }
In a discussion held between BNR and MPs to discuss monetary management policy, parliamentarians realized that there’s a direct correlation between high lending rates and increasing public auction of mortgaged property, as borrowers fail to service their loans in stipulated time frames.
Hon Emmanuel Mudidi, an MP, said that high interest rates are in most cases attributed to the risks involved in lending.
The BNR governor, John Rwangombwa, explained that their involvement in determining lending interest rates can destabilize financial sector performance.
“The bank only sets interest rate ceiling based on source of finance and required benefits. BNR ensures banks build channels through which people can make deposits. We have few financial institutions in Rwanda which can provide long term loans such as Rwanda Social Security Board and some insurance companies, so it’s not possible to put a ceiling on those that provide short term loans,” he said.
Rwangombwa highlighted that when the demand for loans is higher than the supply, market forces set a high interest rate.
The lending interest rate currently stands at between 15% and 16% .
Rwangombwa revealed that they are working closely with banks to reduce non-performing loans, reduce lending interest rates since persistent high interest rates to destabilize the banking sector.
Leave a Reply