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Cooperatives in Rwanda Seek Investor to Run Their New Bank

by Dan Ngabonziza
1:10 pm

Rwandan cooperatives are anxiously waiting for establishment of a bank that will help finance most of their projects, which local commercial banks are reluctant to invest in.

According to Rwandan law, the bank will require an initial investment of 5 billion RWF ($7 million USD).

The Rwanda Cooperative Agency (RCA), the umbrella of all cooperatives in the country, says the investor will be offered 40% (2 billion RWF) stake.

Damien Mugabo, head of the agency told KTPress that the cooperatives have already mobilized the 60% capital needed.

However, with over 2.5million members from 4000 different cooperatives, the agency has a total investment capacity of over 150 billion RWF ($216 million USD). Mugabo says the cooperatives can easily raise 3 billion RWF “in just a week.”

Cooperatives say the need for the bank is very urgent.

 

President Paul Kagame Meeting members of Cooperatives. They Requested for establishment of their Own Bank.

President Paul Kagame Meeting members of Cooperatives. They Requested for establishment of their Own Bank.

On July 13, 2014, during the International Cooperatives Day celebration, which had been attended byRwanda’s President Paul Kagame, cooperatives outlined the challenges they faced. Banks are adamant to give credit to farmers.

Even for a handful that have managed to secure loans, acquired them at astronomical interest rate of up to 21%.

A survey published in 2013 indicated that all the 17 banks in Rwanda find agriculture a very risky sector to invest. Loan requests are often shelved.

John Rwamurenzi, a local farmer applied for 10 million RWF loan ($15,000 USD) from a local bank twice, but never got one.

As an alternative, most farmers depend on community-based micro-finance institutions, such as Umurenge SACCOs which do not give long term loans.

Back at the cooperatives day event, the members appealed directly to President Kagame for their own bank.

Kagame responded in the affirmative, directing the trade ministry to mobilize resources as matter of urgency for the bank.

Five months later, Trade Minister Francois Kanimba says all due diligence has been conducted and the central bank is ready to license any prepared investor.

“The challenge now is finding an investor with banking expertise to take up 40% of shares,” he told KTPress.

Government has pumped millions of dollars in subsidizing farmers. For those with large plantations using irrigation – the state foots about half of the costs.

Rwandan officials believe the new cooperative bank will enable farmers to produce more for export to reduce the country’s trade imbalance.

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