Banks and financial institutions are considered the pivotal point for growth within individual economies in the East African region, this is according to George Bodo, head of banking research, and Ecobank Capital.
Bodo told CNBC Africa that Rwanda is the fourth largest banking sector in the region which is presenting very interesting opportunities for anyone who wants to invest in the country.
(READ MORE: Rwanda’s economy on the right path: IMF)
“The East African economy’s banking sector is under development and currently tails Kenya, Tanzania and Uganda,” he added.
Bodo said that the country’s banking sector was not contributing much at the moment as there were some hurdles that needed to be addressed adding the country had a very small balance sheet which can easily be externalised.
“Rwanda needs assistance from regional peers in Nairobi, Uganda and Tanzania,” said Bodo.
“In terms of contribution outside Rwanda, the involvement of the banking sector is very little.
“A liquidity risk is one of the issues that need to be looked at in terms of policy perspective. Almost half of the banks rely on wholesale funding,” he added.
“The interests’ risks are another challenge that could face Rwandan banks especially when the pricing starts going upward.
Bodo said the central bank was working on putting a cap on pricing on the level of interest rate as they see banking can be highly exposed if interest rates start increasing.