Kenya Commercial Bank is shifting strategy for its subsidiary in Rwanda in search for better returns after an expansion that has seen it open nine branches in the country.
The Rwandan subsidiary, which started in December 2008, recorded a net operating loss of Sh213 million (1.56 billion Rwanda Francs) for the year ending December 2009. “We are not planning to open more branches this year. We are working towards growing the business so the branches are able to pay for themselves,” KCB Rwanda Managing Director Maurice Toroitich says.
Despite the loss, largely setting up costs, Mr Toroitich is upbeat, banking on Rwanda’s economy which, despite slowing down from a high growth rate of 11 per cent in 2008, grew 6 per cent last year.He does not rule out targeted investments for the financial institution, whose balance sheet has grown fourfold from Sh770 million ($10 million) at inception to Sh3 billion ($40 million).
“We will be analysing each branch on a case-by-case basis to meet any investment needs to expand them,” he says. “This is because some of them are becoming small with the number of customers they are attracting.” All branches – four in Rwandan capital, Kigali – have ATMs and two others in offsite locations.
Unlike Kenya, the Rwandan market is characterised by the small and medium enterprises (SME) sector with a growing corporate and personal finance segment. “Just like in Kenya, we are a universal bank,” says Mr Toroitich the father of four who was headhunted from CfC Stanbic Bank to run the Rwandan operation.
Mr Toroitich says KCB has assisted some Kenyan businesses to start operations in Rwanda backed by technical, financial and logistical support from the Nairobi head office. But the Kenyan bank has to contend with competition from other industry players, including Commercial Bank of Rwanda in which private equity firm, Actis, owns 80 per cent with the rest held by the government of Rwanda.
Others are the West African headquartered Access Bank (Rwanda) SA, a subsidiary of Access Bank Plc, and Ecobank Transnational Incorporated (ETI)’s Ecobank Rwanda as well Fina Bank Rwanda, the subsidiary of another Kenyan bank, Fina Bank. It is a competition that the 40 year-old University of Nairobi graduate says they up against in the SME, personal, corporate and even state business levels. “We are slowly gaining the ground. That is why we have been appointed as one of the receiving banks in Rwanda’s proposed first initial public offering.”
The Kigali government plans to divest from the country’s beverage company, BRALIRWA S.A. (Brasseries et Limonaderies du Rwanda) by listing at the Rwanda Over The Counter (OTC) market under an on-going privatisation programme. Currently it has a 30 per cent stake in the company, which boasts a large range of beer and Coca-Cola brands, with transnational Heineken holding 70 per cent stake.
KCB, which is cross-listed at both the Kenyan and Tanzanian stock markets, is the only company listed at the Rwanda OTC market. Mr Toroitich cites general lack of adequate local talent as one of the challenges of operating in Rwanda. “It is amazing what a conducive environment can do to a business,” he Mr Toroitich, “The legal and regulation facilitation in this country is the epitome of sound public private partnerships.”