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Opportunities in the EAC Financial Sector

Opportunities in the EAC Financial Sector. Ms. Vivian Kayitesi Acting Head of Investment Promotion and Implementation Rwanda Development Board (RDB). OUTLINE. Overview of EAC financial sector Specific country overview Investment opportunities. EAC- compelling market.

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Opportunities in the EAC Financial Sector

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  1. Opportunities in the EAC Financial Sector Ms. Vivian Kayitesi Acting Head of Investment Promotion and Implementation Rwanda Development Board (RDB)

  2. OUTLINE • Overview of EAC financial sector • Specific country overview • Investment opportunities

  3. EAC- compelling market • Market size of 130 million people • GDP growth rate above 6%, some have been at high single digit, while others double in recent past (e.g. TZ 5 year average above 7.5% and Rwanda a first –time double digit in 2008) • Financial sector key catalyst for growth given the link between savings, access to credit and poverty reduction

  4. EAC- compelling market • Credit lines still lagging behind-its estimated that only 4% of Africans have access to credit and less than 15% own bank accounts • Need for wider and deeper access to financial services • Focus on innovative instruments for mobilizing long-term savings (Rwanda’s provident fund, Kenya’s SACCOs), credit targeting SMEs, vibrant capital markets, private equity firms remain critical to support economic development • Simultaneous growth of the entire sector because of the inter-relations

  5. Economic growth developments in EAC (annual growth rates) Source: IMF, World Economic Outlook

  6. Major Banking institutions in EAC • Region has experienced considerable expansion, inter-regional and otherwise • Mixture of foreign, regional and locally owned banks • Some international banks eg Barclays, Citibank, Standard chartered, Stanbic etc • Regional and local banks playing key role in the region e.g. KCB, Equity, Bank de Kigali etc • ROE well over 20% (IMF) • Challenges: high interest rates and insufficient creditor information

  7. Others • Insurance still young industry less than1% of global trade share • Uganda (21), Kenya (44) Burundi (5), Rwanda (8), Tanzania (18) • Regulatory framework improving • Need for increased scope of products available • Most EAC countries now have capital markets, with Rwanda newest

  8. COUNTRY OVERVIEW

  9. Overview -Burundi • A structural reform programme aimed at promoting sustainability and broad based economic growth: • Financial sector reform • Regional integration • Privatization of state assets • Positive economic outlook – GDP growth • Agriculture as mainstay of Burundian economy • Numerous reforms undertaken in past few years – taxation, foreign exchange, labour and business laws and the recent promulgation of the VAT tax • Burundi IPA launched in July 2009 • Regulatory Framework - increase in minimum capital requirements for banks in 2009 to 5BN

  10. Overview -Kenya • Region’s largest stock exchange, 44 commercial Banks, 15 MFIs, Nairobi Stock Exchange, 40 licensed insurance companies • Increased income per capita from US$400 to US$ 630. • Initiation of a Financial and Legal Sector Technical Assistance Credit (FLSTAC) to support Formulating a financial sector development strategy • Regulatory reforms – operationalization of the Credit Reference Bureau (informational capital), licensing of deposit taking MFIs (2008)

  11. Overview -Kenya • Stability in sector growth: deposit accounts increase from 2.6M (2008) to 8.4M (end 2009) • Deposits – doubled from 545BN (USD7.2BN) to 1,065BN (USD14BN) • Increase in gross loans – KSH 771BN (Dec 2008) to 783BN in Feb 2010

  12. Over view - Rwanda • Most recent monetary policy reforms falls within the responsibility of the BNR (National Bank of Rwanda) • Other reforms - reduction of the Reserve Requirement Ratio, capital requirement • The formation of Rwandan Financial Sector Development Programme (FSDP) will cover the banking system, MFIs sector, Capital Markets development and modernize payment systems. • Key players – 8 commercial banks, 1 primary MFI and 1 Development Bank • Opportunities abound – only 12% of population has bank accounts (2007 statistics) • Legal and Judicial reforms (new Company’s act, secured transactions law, Insurance law, Intellectual property law etc), commercial courts • Introduction of a capital market (2007) and credit reference bureau (2010)

  13. Overview -Tanzania • Liberalization of the financial sector - increased mobilization of financial resources, increasing competition in the financial market and enhancing quality and efficiency in credit allocation. • Emerging signs of a deepening of the financial sector - credit to private sector increased by 28% in 2009 • Insurance sector contributes to 2% of the GDP – Savings 15% • Growth in all sectors . Highest in Construction and Financial sector – 20% and 10% respectively. • Currently, the Dar es Salaam Stock Exchange is the only formal trading place for securities in Tanzania, where nine companies are listed.

  14. Overview -Uganda The financial sector is regulated and supervised by Bank of Uganda through: • Financial Institutions Act 2004, Micro Deposit Taking Institutions (MDI) Act 2003 and Foreign Exchange Act 2004 • 15 commercial banks, 7 credit institutions, 3 micro finance deposit taking institutions, insurance companies and a securities exchange • Possible reduction of cost of financing – CRB commenced operations in 2009 • Impressive growth of 7% in 2008 (despite crisis) – led by financial services, transport and communication

  15. Investment opportunities

  16. Investment opportunities Banking Sector: • Specialized banking services – agricultural banks, export-import banks • Credit rating services • Investment and Corporate banking • Alternative financing • Expansion of mortgage financing • Capital market intermediaries

  17. Thank You! Asanteni! Merci!

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