Rwanda: Development Bank Gives Dollar Loans to Coffee Exporters
Kigali, Rwanda — Coffee exporters in Rwanda who get loans from the country’s Development Bank (BRD) will receive their credit in dollars rather than the local currency, the franc to avoid losses for both bank and its clients.
The Rwandan Franc experienced spells of slides against the dollar last year which caused a miff among traders as many lost during currency exchanges when the local currency shrinked against the greenbacks.
Now as a caution to cushion against the situation, the Development Bank of Rwanda (BRD) will be disbursing loans to clients in United States of America dollars, in a major policy amendment announced towards the close of last year.
He said the move followed a request from the coffee dealers which the bank had to grant after consultations with relevant authorities.
When the Rwanda Central Bank was contacted for a comment, Governor Claver Gatete said they would assess the policy to ensure it’s consistent with other priorities for the general stability of the economy.
Edward Ojulu a senior business analyst explains that the move also has advantages for the bank.
“Disbursing loans in dollars is however, also good for the bank that has had to convert dollars sourced in order to lend to clients in local currency in the process incurring conversion-related losses. After recovering loans from borrowers, the bank again converts Rwandan Francs into hard currency to settle its obligations with lenders abroad; again incurring conversion related losses,” observed Ojulu.
Under the new policy review, the exporters will borrow in dollars and pay back in dollars.
“It is a win-win situation for the bank and the clients,” said Evode Nshimimana BRD’s director of operations.
So far, the bank is working with over 40 cooperatives in the coffee sector.
The development bank disbursed about RWF8billion or over US$ 12million in 2012.By the end of October 2012, Rwanda’s export receipts from different sectors stood at US$385 million compared to US $315 million from January to October in 2011 representing a 22% increase with the traditional exports of coffee and tea accounting for a combined total of US$ 100 million.
The coffee sector alone is thought to have earned the country $61 million between January and October which was expected to hit $70million after November and December receipts were added representing a $17million increase from $44million earned during the same period in 2010.
The non-traditional and other exports including re-exports raked in a combined total of US$ 285 million receipts as of October with two months to end the year.
But the coffee sector is expected to experience a lower season this year after a relatively good one last year, a normal trend expected as coffee trees take time to rejuvenate.
Besides the low season, last year coffee exporters didn’t make much despite the high volumes following the decline in prices on the international market.
Rwanda has about 90 million coffee trees with over 400,000 coffee farmers operating on an estimated area of about 35,000 hectares. However, the productivity from the sector has been low.
According to Rwanda’s National Agricultural Exports Board (NAEB), Rwandan coffee is among the top rated coffees in the US, European and the Asian coffee markets.
Source: East African Business Week (Kampala)
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