Central Bank Governor Soraya Hakuziyaremye speaking this Thursday
Rwanda’s commercial banks are sitting on record levels of cash, with the Liquidity Coverage Ratio (LCR) now at 337.4%, more than three times what’s required to meet their short-term financial obligations.
This was one of the standout figures from a joint press briefing held on Thursday by the Monetary Policy Committee (MPC) and the Financial Stability Committee (FSC) of the National Bank of Rwanda.
In international banking standards, an LCR of 100% is considered strong—it means a bank has enough liquid assets (like cash and short-term securities) to meet 30 days of expected outflows.
Rwanda’s current ratio shows banks are extremely well-cushioned, with more than three times the liquidity buffer needed.
This was described by the Governor of the National Bank of Rwanda, Soraya Hakuziyaremye, as a sign of financial system resilience—but also as a nudge to commercial banks to rethink their investment strategies.
The Central Bank attributes the high liquidity to two key factors: a sharp increase in deposits by institutional investors like pension funds and insurance companies, and a government strategy to reduce domestic borrowing.
“What would be concerning is actually the opposite—if we had less liquidity,” the Governor said. “That would mean banks are not able to meet their short-term obligations.”
By borrowing less locally, the government is creating space for the private sector—especially individuals, as well as small and medium enterprises (SMEs)—to access more financing.
In past years, government bonds and treasury bills have been an easy, low-risk investment for banks, crowding out private borrowers.
“Now it’s up to the banks to relook at their strategies,” the Governor added. “With less government borrowing, what other avenues do they have for investments? They must not take excessive risks.”
The Central Bank also maintained the key policy interest rate (repo rate) at 6.5%, a signal of continued policy stability amid global economic uncertainty.
Rwanda’s financial sector remains strong, with total assets growing by 23.2% in Q1 2025, reaching FRW 13.6 trillion, up from a 20.8% growth rate in the same period last year.
This expansion is being driven by increased customer deposits, capital injections, and improved investment performance, especially by pension funds.
Lending remains a key focus. As of March 2025, bank loans made up 48.3% of total bank assets, while microfinance institutions (MFIs) had loans accounting for 65% of their balance sheets.
The volume of new loans approved by banks grew to FRW 643 billion in Q1 2025, a significant rise from FRW 498 billion in Q1 2024.
Crucially, the system remains healthy: non-performing loans (NPLs) stood at 2.7% for banks and 4.3% for MFIs, both safely below the 5% benchmark set by the regulator.
The insurance sector also showed strong fundamentals. The solvency ratio—the ability of insurers to pay future claims—was reported at 199%, almost double the required 100%. Liquidity ratios for insurers stood at 109%, and MFIs held 68%, both exceeding regulatory minimums.
Rwanda’s pension sector is also seeing robust growth. Public pension fund assets rose by 24% to FRW 1.9 trillion, while returns on investment increased by 48% year-on-year, reaching FRW 80 billion.
Contributions almost doubled, jumping by 98% to FRW 90.7 billion, thanks in part to the recent reforms that raised mandatory contribution rates.
On the digital front, the financial system continued to deepen and modernize.
Rwanda’s e-payment systems remained stable and uninterrupted, with total electronic payments reaching 334% of GDP at the end of March 2025—up from 214% a year earlier.
The Central Bank’s flagship digital platform, eKash, now has 1.9 million active users and connects 17 financial institutions, supporting both wallet-to-wallet and wallet-to-bank transactions.
The outlook remains positive, but not without caution. The Central Bank noted potential risks from global uncertainties, including tighter global financial conditions and reduced investor appetite for emerging market assets.
“High liquidity in the market could also alter investment patterns,” the Governor warned, adding that BNR will continue to monitor developments closely and take appropriate action to preserve financial stability.
The latest data shows that Rwanda’s banking system is not only stable and well-capitalized—it’s flushed with cash.
But with fewer opportunities to invest in government debt, commercial banks will need to be more proactive and innovative in how they deploy capital. Whether they step up to finance the productive private sector—or stay overly cautious—may shape the next phase of Rwanda’s economic growth.
