Rwanda bank clarifies on loans to exporters

KIGALI, RWANDA – Rwanda Development Bank (BRD), the country’s leading financier of the coffee sector, will continue giving loans to coffee exporters in
Rwanda Francs, a bank official has said.
Emmanuel Karuranga, the bank’s Director of Credit Administration, dismissed earlier reports that the bank is opting to give these loans in United States dollars.
“There has been no policy change at the bank to disburse loans in US dollars as had been previously reported in the local media,” he told East African Business Week.

There had been some public confusion when local media reports stated that BED was about to give out dollar loans. This drew the attention of the, regulator -Central bank of Rwanda.
The issue of dollar loans was raised by some exporters during this year’s new coffee preparatory meeting between the bank management and its clients in December last year.
As part of the preparation for a new coming coffee season, BRD holds annual strategy planning meeting with clients in the coffee sector to chart the way forward.
Karuranga said, “Some clients requested for dollar denominated loans to remove the risk of currency conversion losses when they change earnings from their exports into local currency to settle Rwandese Francs denominated loans”.
He however said he did not expect clients to ask for loans in foreign Currency, because the prevailing situation favored exporters who earn in dollars and settle their obligations at home in the local currency.
According to statistics from Central Bank, the Rwanda Franc has depreciated by 4.9% against the dollar in  February this year up from 4.5 percent in December last year, a tickle in the eye of exporters that they would lose their  money.
Nevertheless, experts believe the slight depreciation actually works in favour of exporters who earn in dollars, because they spend fewer dollars to get Francs.
Karuranga said that the bank will however examine requests for such loans on a case-by-case basis and seek approval from the central bank in accordance with the country’s financial regulations.
“Except in special cases for which approval will be sought from the Central Bank for US dollar denominated loans,” he  said He said that such requests (to get loans in dollars) will be handled on a case-by-case basis. A client has to submit a formal request to BRD with convincing reasons.
“We at the bank will then assess the reasons put forward and if we are convinced, we make a request to the central bank. If the central bank allows, then a client will be lent money in dollars,” he said.
Accordingly, credit extended to the sector in 2012 season totaled Rwf 8 billion (about $12 million), a positive outlook for increased  access to credit for the  sector  normally regarded as most  risky by  financial institutions.
In their assessment, exporters expect lower volumes in the coming season compared to the 2012 season due to seasonal coffee cycle in which a bumper harvest season is immediately followed by lower yields as trees take time to rejuvenate.
Another reason to expect lower volumes is the fact that some exports that did not make profit following a fall in international coffee prices in 2012 compared to 2011, may this time be less enthusiastic.
Coffee prices have fallen to $3-4 per kg on the international  market—eating into the profit margins of exporters who bought the beans locally based on 2011 coffee price boom.
Coffee prices short up in 2011 after Brazil, the leading producer, had its crop damaged by bad weather.
Karuranga however blamed it on the competition among exporters themselves who rushed to pay high prices for coffee beans only to reach the market to find prices had fallen.
Some exporters paid as high as Rwf 350 per kilogram. Exporters speculated for higher prices because Brazil, the leading exporter had supply problem in 2011 but by the time the Rwandans reached the market, the situation in Brazil had changed and a lot of coffee had entered the market..

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