By Elias Hakizimana.
There is need for innovation in the insurance sector to bring on board more products that will serve the needs of population; John Rwangombwa the governor of National Bank of Rwanda has made the case.
While presenting Monetary Policy and Financial Stability Statement on Thursday, he said that with more insurance products people will also grow their business and reduce on the risks of relying on few products.
During the period under review, total assets of the insurance sector increased by Rwf54.3 billion to Rwanda 477.3 billion which is 1.8 percent of GDP.
Peace Uwase, the Director General of the Financial Stability department at BNR said that there are a lot of opportunities in terms of what the sector can do to diversify their revenues.
“This can enable them to spread their significantly high costs over a wider product range and therefore improve performance going forward,” she said.
She showed that insurance penetration in the sector is still low 1.7%, and added that, “the key driver really is about product diversification. There is still a lot of reliance on motor and medical products.”
Lending also accelerated in agriculture and consumer loans.
In agriculture, increased lending reflects good agriculture seasons that enabled farmers to borrow for farming purposes.
Experts say that more lending to agriculture sector is unlocked by more insurance products in the sector.
Credit to agriculture sector is expected to grow from 5.2% 2017 to 10.4% in 2024.
Meanwhile during the presentation, Rwangombwa said that the financial system continues to grow and remains dominated by banks.
The banking sector accounted for 66.3 percent total financial system’s assets as at end June 2019.
Lending remained the main business of banks.
Credit growth was particularly strong in “transport and communication” in “water and energy” and in communication, partly demonstrating the banks’ increased financing of the “made in Rwanda” program
The share of loans in banks’ assets increased from 57.7 percent in June 2018 to 58.8 percent in June 2019.
Non-performing loans ratio of banks, steadily dropped since Sept 2017.
The slowing NPL ratio during the first half of 2019 reflects improved economic performance.
The balance sheet of the microfinance sub-sector continued to expand during the year ended June 2019.
Total assets of this sub-sector increased by FRW 34 billion.
To address the vulnerabilities of Saccos, there is need to consolidate them in bigger financial institutions at district level but this could also be possible after their automation, officials said.
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