The policy rate is an interest rate that the monetary authority (central bank) sets in order to influence the evolution of the main monetary variables in the economy.
The move was announced Thursday following the quarterly Financial Stability Committee (FSC) and Monetary Policy Committee (MPC) meetings that were held in Kigali on Wednesday and Thursday.
The decision to reduce the rate was taken following the MPC observation that 2017 is ending with stable macroeconomic conditions.
In June, the interest had also been cut from 6.25% to 6%.
Speaking to the media, Central Bank Governor, John Rwangombwa said that cutting policy rate from 6.25% to 6% brought good impacts considering how different banks continue to provide loans to private investors.
“The decision had impact in terms of the number of private investors who accessed bank loans in the last nine months of 2017. Loans increased by 14.3% compared to the same period in 2016,” he said.
“This is what the Monetary Policy Committee considered and reduced the policy rate to 5.5% in order to help banks continue to provide loans,” he said.
“It is rare for banks to come for credits in Central Bank but when they come, that is the policy rate we consider,” he added.
He said they wish that reduced repo rate impact banks’ interest rates for clients though it takes a process compared to the state of the country’s economy.
The FSC observed that the assets of the financial sector continued to increase in the third quarter of 2017. Total assets of the banking sector increased by 17% (year-on-year) in September 2017 to Rwf2.6 trillion while the microfinance sector increased by 9.5% to Rwf242.4 billion.
Assets of the insurance sector and pension increased by 13% and 15% to Rwf386.6 billion and Rwf690.9 billion respectively.
Non-performing loans ratio in banks stood at 7.7% down from 8.2% as of June 2017 while in microfinance institutions declined to 8% from 12.3% in the same period.
The Financial sector remains profitable as total banking net profit stood at Rwf30.6 billion in September 2017 while that of the microfinance sector and the insurance sector was at Rwf3.1 billion and Rwf29.4 billion respectively.
Leave a Reply