“PROMOTInG GROWTh anD DeVelOPMenT”
Rwanda Development Bank Annual Report 2009
Rwanda Development Bank Annual Report 2009 2 2009 Annual Report
TABLE OF CONTENTS
Profile of BRD 7 Board Of Directors 8 BRD Management 9 Message From The Chairman Of The Board 10 Achievements for the year 13 Corporate Governance 14
INTRODUCTION 18
i OPERATIONS OF THE BANK 22 1.1 Activities of the Bank 22 1.1.1 Loan 22 1.1.2 Equity 23 1.1.3 Guarantee Funds 24
1.2 Portfolio of the Bank 25 1.2.1 Disbursements 27 1.2.2 Loan portfolio per class of risk 28
1.3 Organization of the Bank 30 1.3.1 Organizational structure 30 1.3.2 Human Resources 32 1.3.3 Capacity Building 32
1.4 Risk management of the Bank 34 1.4.1 Risk Management Framework and Responsibilities 34 1.4.2 Achievements of the year 34
1.5 Development Impact 36
ii FINANCIAL OVERVIEW OF THE BANK 40 2.1 Financial overview 40 2.2 Report of the Independent Auditors 42 2.3 Financial Statements 45
Shareholders of the Rwandan Development Bank on December 31st 2009 49 Notes To The Financial Statements 50 2009 Annual Report 3
list of tables
Table 1: Indicators on the financial soundness of the banking sector on 30/09/2009 19 Table 2: Evolution of outstanding loans in RWF Million (2006 - 2009) 25 Table 3: Trend in disbursements in RWF Million (2006 - 2009)2 27 Table 4: Evolution of the portfolio per class of risk in RWF Million 28 Table 5: Distribution of staff by level of education 32 Table 6: Overview of trainings in 2009 32 4 2009 Annual Report
list of graphs
Chart 1: Approved Projects by activity 22 Chart 2: Trend of approvals by economic sectors (2006 – 2009) 23 Chart 3: BRD portfolio per term 25 Chart 4: BRD portfolio per province 26 Chart 5: BRD Exposure by kind of investment 26 Chart 6: Trend of disbursements from 2006-2009 27 Chart 7: Evolution of the Bank portfolio per class of risk 28 Chart 8: Trend of BRD portfolio 29 Chart 9: Organizational Structure of the Bank 31 2009 Annual Report 5
LIST OF ACRONyMS & ABBREVIATIONS
BRD: Rwanda Development Bank DFg: german Organization financing investment in developing countries DFI: Development Finance Institutions FAgACE: African Fund for guarantee and Economic Cooperation MFI: Microfinance Institutions SME: Small and Medium Enterprises RWF: Franc rwandais/Rwandan Francs
Taux de change en Francs Rwandais/Exchange rate in Rwandan Francs :
bUYInG/aChaT Mean/MOY. SellInG/VenTe 1 Dollar Américain/US Dollar 567.81 571.24 574.66 1 Euro 813.50 818.41 823.32
Source: national Bank of Rwanda, Exchange rates as at 31/12/2009 Rwanda Development Bank Annual Report 2009 2009 Annual Report 7
Profile of BRD
• Development Finance Institutions created in 1967 • Capital base of RWF 7 Billion or around US$ 12.1 Million • Government of Rwanda as majority shareholder with 72.53% and the private sector and development finance institutions with 27.47% • Mandated as the “Financier” of Rwanda’s development
Vision To be “the most profitable bank at the service of poverty reduction”.
Mission BRD is the Government of Rwanda’s investment arm that finances the nation’s development objectives with a focus on the priority sectors of the economy
Strategic Priorities • Mobilize financing to enable Rwanda’s development • Develop special financing programs for financing key export sectors • Contribute to the development of Microfinance services • Expand our product portfolio in order to respond to customer needs • Engage and support key partners and clients • Increase our effectiveness through reconfiguration and training
BRD Core Values • Integrity • Transparency • Excellence • Teamwork
BRD Products and Services • Direct investment through loans and equity • Loan syndication • Trade Finance • Advisory services • Leasing • Agency functions • Guarantees 8 2009 Annual Report
BOARD OF DIRECTORS
Mr Fabien MAJORO Mrs Jane MURUNGI Chairman of the Board Vice-Chairman
Mrs Gaëtan SCAVÉE Mr André HABIMANA Mrs Hadija MURANGWA Director Director Director 2009 Annual Report 9
BRD MANAGEMENT
Mr Jack Nkusi KAYONGA Managing Director
Mr Innocent BULINDI Ms Christine KARANGWAYIRE Mr Emmanuel KARURANGA Director of Finance Director for Investments Director for Risk Management
Mr Vedaste AVEMARIYA Mr Désiré RUMANYIKA Mr Prosper NYIRUMURINGA Director for Corporate Affairs CEO of BRD Advisory Services CEO of BRD Development Fund 10 2009 Annual Report
MESSAGE FROM THE CHAIRMAN OF THE BOARD
On behalf of the Board of Directors, I have the The performance pleasure of presenting the Bank’s 2009 annual of the Bank in 2009 report. Despite the global financial crisis that negatively affected the overall economy, the Rwandan is spectacular. Development Bank sustained a high growth in terms I commend of operational and financial indicators. the dedication
The loan portfolio increased by 38.3% from RWF 26.1 and hard work Billion in 2008 to RWF 36.1 Billion in 2009. This is of the staff that mainly due to increased investments in large projects are the driving that are meaningful to the economy. force behind the Total approvals and disbursements for the year attained spectacular levels of RWF 25.7 Billion and numbers reflected RWF 14.8 Billion respectively. Approvals increased by in our financial 147.1%, moving from RWF 10.4 Billion in 2008 to RWF statements 25.7 Billion in 2009. These approvals were distributed 2009 Annual Report 11
among the priority sectors of the Rwandan Economy as follows: tourism (26%), services and other industries (24%), agriculture and livestock (17%), exports (17%), education (10%), leasing (5%) and microfinance (1%). Disbursements also increased by 97.3% from RWF 7.5 Billion in 2008 to RWF 14.8 Billion in 2009. More importantly, the Bank has maintained its focus on socio-economic impact by creating new jobs, generating export and tax revenues and contributing to the development of the rural areas. In 2009 the Bank created 1400 jobs and injected around RWF 17 Billion as added value to the economy. In microfinance, the Bank continued its strong dedication to the development of cooperatives, associations and microfinance institutions. Over 2009, the Bank approved microfinance projects worth RWF 1.6 Billion and disbursed RWF773 Million. In addition 135 jobs were also created and the Bank indirectly impacted on the lives of 20,059 members of cooperatives and associations and 29,159 clients of microfinance institutions.
Overall net income grew by 87.3% from RWF 845.8 Million in 2008 to RWF 1.58 Billion in 2009. This performance is mainly due to the effect of the gain on disposal of equity shares in Sorwathé to the tune of RWF 724 million. In a nutshell, the year 2009 has been a relatively good year for the Bank, thanks to our esteemed clients who continually show interest in BRD. Customers remain at the center in BRD and this has motivated the Bank to implement a service charter that has greatly improved service delivery and customer care. Last but not least, I would like to congratulate the dedicated and hard working team of BRD for their great performance in 2009. The results of 2009 would not have been possible without their efforts and professionalism.
Looking at the past and current achievements, I am glad to note that the Bank’s ability to execute its mandate continues to enjoy the support and trust from the Government, our shareholders, our clients and development partners. It is in this regard that I would like to specially thank the Government of Rwanda, our shareholders and partners for their continued support. In addition I would like to express my appreciations to my colleagues on the Board for their invaluable advice and guidance throughout the year. The Vision 2020 can be a reality and I am confident that together we can drive forward our mission today, tomorrow and into the future. I thank you!
Fabien Majoro Chairman of the Board of Directors 12 2009 Annual Report
Partnership towards development 2009 Annual Report 13
highlights in 2009
Achievements for the year
The year 2009 has been a record year for BRD and its staff in their contribution to the country’s development objectives. Below are the achievements made in 2009:
• A 38.3 % increase in total loan portfolio from RWF 26.1 Billion in 2008 to RWF 36.1 billion in 2009 • A record approval of RWF 25.7 Billion and disbursement of RWF 14.8 Billion • An increase of 87.3% in net income from RWF 845.8 Million in 2008 to RWF 1.58 Billion in 2009 • Approval of export promotion projects to the tune of RWF 4.4 Billion, meaning 17.1% of total project approvals for the year • Establishment of BRD Advisory Services, a BRD subsidiary company that will bridge BRD gap in terms of advisory services • The Creation of BRD Development Fund, a BRD-managed Fund for SME development • The implementation of a Cassava plant and milk collection centers, both considered as strategic projects that are initiated by the Government of Rwanda • The establishment of a Trade Finance service that will allow the Bank to increase its non-interest income • The implementation of a Mobile Team Services (MTS) which is a Bank’s outreach program that informs rural citizens on BRD products and services • The introduction of a Social and Environmental Management System that enables the Bank to manage better social and environmental risks • The negotiation of a credit line of US$ 5 Million with the East African Development Bank • The development of the tourism sector through the approval of RWF 6.6 Billion for the construction of apartments and hotels of medium and high standing • Development of the education sector with the approval of RWF 2.5 Billion for the construction and extension of 12 schools • The launch of a service charter that will improve customer service and efficiency in the Bank • The restructuring of the Bank and a re-alignment of existing policies and procedures 14 2009 Annual Report
CORPORATE GOVERNANCE
The Rwandan Development Bank believes that good corporate governance is a key to its success. The Bank strives for the highest corporate governance standards starting with its Board of directors. Through the promotion of transparency, ethics and accountability, the bank would like to have the best corporate governance standards possible. The Board of directors is always developing and improving its structure and its corporate governance standards to match best national and international practices. This showcases a commitment to the highest ethical and integrity standards towards all stakeholders.
Governance Structure The governance structure of the Rwandan Development Bank is as follows:
General Assembly The General Assembly is the highest corporate governance level of the Bank. In 2009 there was only one Ordinary General Assembly.
Board of Directors The Board of directors is the second highest corporate governance level of the Bank. In 2009, the Board was made of the following 5 members:
Directors representing the Group “A” of Shareholders • Mr Fabien MAJORO, Chairman of the Board • Mr André HABIMANA, Director • Mrs Jane MURUNGI, Vice Chairman • Mrs Hadija MURANGWA, Director
Directors representing the Group “B” of Shareholders: • Mrs Gaëtan SCAVÉE, Director
In the year 2009, the board held a total of 8 board meetings.
Sub-committees of the Board of directors The Board is also made of three sub-committees: the credit risk committee, the audit committee and the assets and liabilities committee (ALCO).
Management The Managing Director and his management committee are responsible for implementing the 5 year strategic plan (2010-2014) and the day-to-day management of the Bank. The management committee met almost every week to discuss urgent matters and policy directions for the bank. 2009 Annual Report 15
Internal audit and internal control The internal audit helps the bank to accomplish its objectives by bringing a systematic and disciplined approach to evaluate and improve efficiency in the management of risk, control and processes.
Surveillance The operations of the bank are audited by PKF, an audit firm appointed this financial year by the General Assembly. At the end of the exercise, the auditors presented to the General Assembly the bank’s financial reports.
Approach for risk management A risk management framework was adopted in the bank. This will allow the bank to define the process, structures, infrastructures as well as the responsibilities for the identification, the evaluation, control and mitigation of risks that the bank faces in achieving its mission.
Code of Conduct On the 22nd April 2005 the Board of directors adopted the bank’s staff code of conduct which states that every staff, besides his professional competencies, should portray in his duties high moral qualities that should govern the relationship between him and his employer, his clients and the Bank partners. The staff of BRD is committed to the most demanding norms of conduct in professional ethics. They should be honest, independent and show objectivity and discretion. They should not consider their personal interests and should avoid any situation leading to conflict of interests.
Dissemination of Information The Rwandan Development Bank is committed to disseminate and publish its reports in a transparent manner. Information like the financial statements, the annual and quarter reports that are provided to stakeholders, presents the bank in an objective and transparent manner. The Bank publishes the quarter and annual financial statements in the leading newspapers and on the website. In addition the activity reports are transmitted regularly to all the bank’s partners. 16 2009 Annual Report
BUSINESS PERFORMANCE OVERVIEW
Approvals (in RWF Million) 25,753 10,485 145.6%
Disbursements (in RWF 14,815 Million) 7,584 95.3%
Portfolio (in RWF Million) 36,173 26,100 40%
Number of new loans 121 49 147%
Average value per 213 approval (in RWF Million) 209 2%
Total operating expenditure 1,866 (in RWF Million) 1,537 21%
Number of employees 78 73 6.8%
Net contribution 185 per employee to 91 disbursements 103%
Number of jobs created 1,400 900 56%
2009 2008 % Change
Financial ratio
Return On Equity (ROE) 11% 6% 75%
Return On Asset (ROA) 3% 2% 58%
Net Earnings Margin 30% 22% 38%
Earnings per Share 226 121 87% 2009 Annual Report 17
Net Earnings Growth 87% 14% 542%
Revenue Growth 36% 16% 126%
Operating expense to 36% income 40% -10%
Efficiency ratio 73% 78% -7%
Staff costs to income 21% 23% -8%
Staff costs to operat- 58% ing expense 57% 2%
Non performing loans as 7.4% % of total loans 12.2% -40%
Capital Adequacy ratio 27% 35% -23%
Total capital & reserves to 39% portfolio ratio 50% -23%
Issued capital to total 12% assets 16% -20%
Long-term debt to 1.49% equity ratio 1.36% 9%
Cash & Cash equivalents 14% to total assets 24% -42%
Liquidity ratio 2.05% 4.6% -55%
Fixed Asset ratio 21% 87% 23% 81% 7%
2009 2008 % Change 18 2009 Annual Report
INTRODUCTION
Economic Environment1 In September 2009, following high inflationary pressures, particularly in the first three quarters of 2008, Rwanda experienced relatively low inflation, and thanks to the better performance of the food production and decline in international fuel prices. From 22.3% in December 2008, the annual headline inflation fell to a single digit figure of 5.7% in September 2009. The annual average inflation dropped to 14.3% from 15.6% in August and the underlying average inflation has reached 13.1% from 15.3% in August 2009. Rwanda exports remained dominated by traditional export products such as coffee, tea and minerals, constituting more than 81% of total export earnings in the first nine months of 2009. The value of major mineral exports was USD 41.14 millions representing 31.34% of total export earnings, while coffee and tea amounted to USD 66.14 millions, which represent 50.38% of total export earnings. Coffee exports continue to perform poorly, decreasing by 8.78% in value and 4.72% in volume. This fall in value was due to the decline in international prices, from an average of 2.58 USD/kg during the first nine months of 2008 to 2.47 USD/Kg in the first nine months of 2009, while tea continue to perform better in both value and volume with growth rates of 16.24% and 1.26% respectively, resulting mainly from high international prices, from an average of 2.13 USD/kg to an average of 2.45 USD/Kg in the first nine months of 2009.
Banking Sector The banking sector recorded a growth of 4.2 % during the 3rd quarter 2009. The banking industry recorded total assets amounting 546.3 billion RFW against 524.1 billion RFW the previous quarter. The sector registered continuous growth in total assets over the last two quarters. The solvency ratio has improved; the solvency ratio on a consolidated basis increased to 20.5% from 19.3% in June 2009 against 15.9% in December 2008. The banking system is well capitalized and all banks are in compliance with the required minimum capital adequacy ratio. On a consolidated basis, the quality of loan portfolio slightly increased during the 3rd quarter 2009 with a ratio of Nonperforming loans (NPL) to total loans portfolio (gross) of 13.4% and 13.6% at the end of June and September 2009 respectively. As at September 2009, the consolidated net profit after tax was established at RWF 4 billion RWF compared to 8 billion RFW at the end of September 2008. This deterioration is due to the loss registered by some commercial banks following the deterioration of their assets quality. Concerning the liquidity, almost all banks registered comfortable liquidity level during the quarter under review. The banking sector continued to register a good rating in liquidity position during the quarter ended September 30, 2009 with an overall liquid assets to deposits ratio reported at 61.7% from a level of 59.3% in June 2009. In general, developments in the banking sector during the 3rd quarter 2009 indicate a healthy banking system with a growth in terms of assets and mobilization of deposits. Compared to the whole banking sector in 2009, BRD ended the year with indicators that depict its financial
1 Source : National Bank of Rwanda, Third quarter 2009 Report 2009 Annual Report 19
Table 1: Indicators on the financial soundness of the banking sector on 30/09/2009
INDICATORS SEPT - 08 DEC - 08 MARCH - 09 JUNE - 09 SEPT - 09 Solvency Ratio 15.5 15.9 19.1 19.3 20.5 Insider loans / Core Capital 16.7 16.7 9.2 17.0 7.3 large Exposures / Core Capital 92.5 103.1 92.7 82.8 72.9 NPls - Provisions / Core Capital 16.7 25.2 23.2 18.5 20.1 Non-perfoming loans ratio 11.4 12.6 13.9 13.4 13.6 Provisions / NPls 75.9 66.3 66.9 70.9 65.9 Earning Assets / Total Asset 76.9 81.3 78.4 77.3 77.1 large Exposures / Gross loans 15.3 17.4 18.4 17.5 16.9 Return on average assets 2.1 2.4 1.6 0.9 1.0 Return on average equity 16.9 18.5 11.4 6.4 7.0 liquid assets / Total deposits 68.7 61.1 65.4 59.3 61.7 Interbank borrowings / Total deposits 9.8 8.1 9.3 9.1 8.2 Gross loans / Total deposits 81.1 87.8 88.6 82.8 76.1
Source: national Bank of Rwanda soundness. The non performing loan rate reduced from 12.2% in 2008 to 7.4% in 2009 and total assets increased by 18.8%. Its loan portfolio increased by 38.3% and the Bank closed the year with a return on assets of 3% and a return on equity of 11%. 20 2009 Annual Report
Financing productive investment that generate added value and create employment 2009 Annual Report 21 22 2009 Annual Report
i OPERATIONS OF THE BANK
1.1 Activities of the Bank
Despite a financial crisis that negatively impacted businesses worldwide and Rwanda in particular, the Rwandan Development Bank achieved a record performance in terms of operational and financial indicators.
1.1.1 Loan In 2009, the Bank approved a record of 155 projects worth RWF 25.7 Billion compared to 105 projects worth RWF 10.4 Billion in 2008, meaning an increase of 147.1% in terms of amount. The tourism sector has the highest amount of approvals with a share of 26% of total approvals, followed by the sector of services and other industries with 24% and the exports sector with 17% just like the agriculture and livestock sector. Below is a representation of BRD approvals per sectors of activity. The activities above can be regrouped into the following economic sectors:
Chart 1: Approved Projects by activity
24% 17% Agriculture and Livestock Leasing
5% Microfinance 1% Education Tourism 17% 10% Exports
Services And other industries 26%
Primary Sector In the primary sector the Bank finances agricultural and livestock projects. In 2009, the Bank approved projects worth a total amount of RWF 4.3 Billion. Since most of the agricultural projects are located in rural areas, the Bank has started the Mobile Team Services which is an outreach program of the Bank that informs rural people on the Bank’s products and services. Secondary Sector 2009 Annual Report 23
The bank approved projects worth RWF 5.9 Billion in the secondary sector. Among these projects, there are tea factories, coffee washing stations, and small industrial units that do agro-processing.
Tertiary Sector In the tertiary sector, the Bank approved projects to the tune of RWF 15.4 Billion. These are projects in the education, tourism, health and ICT sectors as well as the refinancing of microfinance institutions.
The graph below shows the trends of project approvals by economic sectors since 2006.
Chart 2: Trend of approvals by economic sectors (2006 – 2009)
30.000
20.000 15,430
6,715 3,621 10.000 3,999 5,123 5,970 8,698 2,781 7,301 4,724 3,411 4,353 1,174 1,627 633 2005 2006 2007 2008 2009
Tertiary Secondary Primary
1.1.2 Equity
In order to promote start-up companies and SME development in general, the Rwandan Development makes equity investments in promising companies in priority sectors of the Economy. In 2009 the Bank has a total equity participation portfolio of RWF 3.6 Billion. This portfolio is made up of shares in different companies ranging from agro-industries to a venture capital fund, a housing bank and even a free trade zone. A detailed equity participation portfolio is presented in the notes to financials. 24 2009 Annual Report
1.1.3 Guarantee Funds
BRD/SME Guarantee Fund SMEs do not easily access credit because they are often faced with a problem of collaterals. To ease this problem, BRD has a SME Guarantee Fund that allows SMEs without enough collaterals to access a loan. At the end of the year 2009 the Fund capacity is valued at RWF 8.8 Billion.
Agricultural Guarantee Fund The Bank also provides an agricultural guarantee fund that is managed by the Central Bank. The Fund provides a guarantee to projects in the agricultural and livestock sector. At the end of 2009, the Bank had a total amount of RWF 6.2 Billion guaranteed by the Fund.
FAGACE Guarantee Fund The Bank still benefits from a guarantee line with the African Fund for Guarantees and Economic Cooperation (FAGACE) based in Cotonou, Benin. The Guarantee Fund amounting to RWF 1.1 Billion with a period of 8 years, guarantees between 40% and 80% of loans provided by BRD and not more than 60% for start-up projects. Three projects have been guaranteed by the Fund for a total amount of RWF 251.7 Million. At the end of the year the Fund capacity amounts to RWF 988 Million.
Guarantee Fund under the Business Plan Competition In the framework of the Competitiveness and Enterprise Development (CEDP) of the Government of Rwanda and the World Bank, the Private Sector Federation and BRD signed in 2007 a partnership agreement relating to the Business Plan Competition/Guarantee Fund Program. The Business Plan Competition/Guarantee Fund aims to develop the capacity of small and medium enterprises and improve their access to finance to support their growth and development. At the end of the year 2009, the Fund allocated 22 projects to the Fund for a total amount of RWF 306.7 Million. The Fund capacity at the end of the year amounts to zero.
IFC Risk-Sharing Facility On May 22nd 2008, BRD signed with the International Finance Corporation a risk-sharing facility that will boost BRD financing in the education sector. Under this facility, both IFC and BRD will share risks in the financing of education projects for a maximum portfolio of RWF 7 Billion. In addition, under the agreement, IFC will also provide technical assistance and capacity building to BRD and to entrepreneurs in the education sector. At the end of 2009, the BRD and IFC shared the risk for a portfolio of 25 projects with an outstanding balance of RWF 3.2 Billion, of which RWF 1.1 Billion are guaranteed by IFC. 2009 Annual Report 25
1.2 Portfolio of the Bank
In 2009 the Bank’s outstanding portfolio increased by 38.3% moving from RWF 26.1 Billion in 2008 to RWF 36.1 Billion in 2009. This record increase is due to an impressive performance of disbursements that increased by 97.3% from RWF 7.5 Billion in 2008 to RWF 14.8 Billion in 2009.
The table below shows the trend of BRD portfolio from 2006 to 2009.
Table 2: Evolution of outstanding loans in RWF Million (2006 - 2009)
NATURE OF ACTIVITIES 2006 2007 2008 2009 Agriculture – Livestock 5,713 5,303 5,273 5,916 Agro- industry 4,002 3,941 6,423 8,997 Manufacturing industries 1,367 4,267 1,930 3,319 Mining 13 175 77 81 hotels and tourism 3,075 4,795 5,978 8,900 Others* 4,290 5,729 6,419 8,960 TOTal 18,460 24,210 26,100 36,173
*Others is mainly made up of projects in real estate, education, health, iCt and energy.
As the leader in long term financing, BRD focuses its activities in financing long term projects that are considered as productive investments to the country. At the end of the year, BRD portfolio was made up of 79% for long term loans, 15% for medium term loans and 6% for short term loans. The chart below gives a distribution of BRD portfolio per term.
Chart 3: BRD portfolio per term
15% Short Term Medium Term 6% Long Term
79% 26 2009 Annual Report
The majority of projects financed by BRD is located in Kigali province with a concentration of 53% of the total loan portfolio, while 47% are projects located in other provinces. Below is a chart illustrating BRD portfolio by province.
Chart 4: BRD portfolio per province
12% 10% Kigali
8% 17% Eastern Province Northern Province
Western Province
Southern Province
53%
In terms of exposure, the big portion of BRD investments is made up of loans that account for around 90% of BRD portfolio. The remaining 10% are equity investments in start-up and established companies.
Chart 5: BRD Exposure by kind of investment
10% Loan Equity
90% 2009 Annual Report 27
1.2.1 DiSBuRSEMEntS Disbursements in 2009 have drastically improved from RWF 7.5 Billion in 2008 to 14.8 Billion in 2009. The tertiary sector remains the most financed sector with projects in tourism, real estate, education, health and even telecommunications. The table below gives a representation of BRD disbursements from 2006 to 2009. The graph below shows that disbursements have shown a decreasing trend since 2006. This trend has
Table 3: Trend in disbursements in RWF Million (2006 - 2009)2
SECTOR 2006 2007 2008 2009 Primary Sector 2 894 1 524 2 283 3 187 Agriculture – livestock 2 894 1 524 2 283 3 187 Secondary Sector 4 454 4 376 2 279 3 744 Agro– industries 3 770 3 999 2 172 2 476 Other industries 684 376 104 1 188 Mining & handicrafts - 1 3 80 Tertiary Sector 4 738 4 274 3 022 7 884 hotels & Tourism 1 082 1 730 2 271 3 182 Others 3 656 2 544 751 4 702 TOTal 12 086 10 174 7 584 14 815 greatly improved with disbursements increasing by 97.3% from 2008 to 2009. This performance has been mainly driven by approvals that increased by 147.1% from 2008 to 2009. The graph below gives a trend analysis of BRD disbursements since 2006.
Chart 6: Trend of disbursements from 2006-2009
BILLIONS 16 14 12 10 8 Disbursements 6 4 2 0 2006 2007 2008 2009 2010
2 Staff loans not included 28 2009 Annual Report
1.2.2 LOAn pORtFOLiO pER CLASS OF RiSk The loan portfolio of BRD has improved compared to last year. Total non-performing loans have reduced by 14.8% from RWF 3.1 Billion in 2008 to RWF 2.7 Billion in 2009. The non-performing loan rate has therefore significantly reduced from 12.2% in 2008 to 7.4 % in 2009. This impressive performance is mainly due to an increased portfolio and successful recovery activities. The table below gives a tabular representation of BRD portfolio per class of risk.
Table 4: Evolution of the portfolio per class of risk in RWF Million
OUTSIDING LOAN OUTSIDING LOAN CLASS OF RISK % % 2008 2009 Performing loans 22,906 87.7% 33,464 92.4% Normal loans 20,217 77.3% 23,038 63.3% loans to monitor 2,689 10.4% 10,426 29.1% Non-performing loans 3,194 12.3% 2,709 7.4% Doubtful loans 1,410 5.5% 261 0.7% litigious loans 454 1.8% 434 1.2% Contentious loans 1,330 5.1% 2,014 5.6% Total Outstanding 26,100 100% 36,173 100%
BRD loan portfolio has consistently been increasing. From 2006 to 2009, BRD portfolio has increased by 93.3%. This is a great performance since non performing loans have also reduced in amount and in rate. The graph below gives an evolution of BRD portfolio since 2006.
Chart 7: Evolution of the Bank portfolio per class of risk
33.03 BILLIONS 30.000 Billions
22.6 BILLIONS
20.000 Billions
10.000 Billions
3.19 BILLIONS 2.70 BILLIONS
Outstanding loan 2008 Outstanding loan 2009
Non-performing loans performing loans 2009 Annual Report 29
Chart 8: Trend of BRD portfolio
BILLIONS 40 36.17 35
30 26.10 24.21 25
20 18.46 15 10 3.19 5 2.67 1.91 2.70 0 2006 2007 2008 2009
Non-performing loans Loan portfolio 30 2009 Annual Report
1.3 Organization of the Bank
1.3.1 Organizational structure The Rwandan Development Bank is organized under the following four departments: • The Investment department • The Finance department • The Corporate Affairs department, and • Risk Management department
In 2009 the management of the Bank undertook a restructuring that resulted in the creation of the followings entities: • BRD Advisory Services (BAS) which is a BRD subsidiary company that provides advisory services to the public and private sector • BRD Development Fund which a BRD Fund that will manage all credit lines and guarantee funds geared towards SMEs development • A new unit in charge of special project and resource mobilization • A new unit for Trade Finance
In addition to the above restructurings, the investment department was also divided into the following products: • Loan & equity • Microfinance • Leasing • Real Estate • Monitoring • Disbursement • and Capacity building 2009 Annual Report 31
Below is a representation of BRD’s organizational chart.
Chart 9: Organizational Structure of the Bank
General Assembly
board
Administrative assistant Managing director
Brd advisory services
Internal audit Deputy Managing dir.
Research and branches development fund
Resource mobilisation & Special projects
corporate affairs risk management investment department finance department department department
loans + equity administration accounting risk management
microfinance human resource portfolio work-out and recovery
leasing it trade finance legal
communication and real estate treasury & credit marketing
monitoring
disbursement
capacity building 32 2009 Annual Report
1.3.2 HuMAn RESOuRCES At the end of the year 2009, the Bank had a total number of 78 employees. Nine employees were recruited during the year and the Bank also experienced 5 resignations. The number of professional staff is equal to 59 employees while 19 are support staff. In addition, 79% of the staff has a first degree or higher from 69% in 2008 and only 13% have not completed their university education compared to 23% in 2008. The table below gives a classification of BRD staff per level of education. Table 5: Distribution of staff by level of education
2007 2008 2009 level of education Number % Number % Number %
First degree or higher 53 70 50 69 62 79%
A1 level 6 8 6 8 6 8% Level without university degree 16 22 16 23 10 13%
TOTal 75 100 72 100 78 100%
1.3.3 CApACity BuiLDinG Since the human resource is its greatest asset, the Rwandan Development is committed to build and reinforce the capacity of its staff. In 2009 BRD staff were trained in more than 20 subjects. The table below gives an overview of the staff training in 2009.
Table 6: Overview of trainings in 2009
beneficiary Training Subject Place
head of Research & branch Unit Strategy and Management in banking United Kingdom
head Identification Unit and one investment analyst Appraisal of Infrastructure projects South Africa Issues in negotiating and drafting head of Legal Unit & head of recovery Uganda contracts head of Audit Unit Auditing in public Service South Africa
Officer in Treasury and Credit lines Unit Securities Industry training Institute Rwanda
Trade Finance Officer Securities Industry training Institute Rwanda
professional executive secretaries and Secretary to the Director of Investments Swaziland Administrators programme
project Finance, Resource Mobiliza- Three investment analyst and a monitoring officer South Africa tion, Legal agreements and ppp 2009 Annual Report 33
Senior Accountant Auditor Workshop on IAS/IFRS Rwanda Accountant
principal Investment Analyst Workshop on rural Financing Rwanda
Director of Finances and head of Treasury and credit Eastern Africa Tax Workshop Rwanda lines Unit
All presentation on Trade finance Rwanda
All staff in DDI, DgRC & DF Training on Microfinance Module Rwanda
All Analysts Investment and Leasing Rwanda
All Analysts Training on Microfinance Module Rwanda
Social and Environmental Manage- All Unit heads and Directors Rwanda ment system
In addition to the above trainings, the Bank also sponsored 4 employees for further studies at the Masters level, one for a doctorate level and 3 employees for professional certifications in accounting. In 2009, the bank also benefited from a technical assistance from the European Investment Bank, the Development of Southern Africa and the World Bank Multilateral Investment guarantee Agency (MIgA). 34 2009 Annual Report
1.4 Risk management of the Bank
The Rwanda Development Bank (BRD) conducts development business in Rwanda since 1967, activities that go together with different risks, especially credit risk, liquidity and market risk as well as operational risk.
To respond to that environment of complex risks and changes in banking and financial sector in Rwanda, the Bank established since 2006 a credit and risk management function. The objective was to manage risks pro-actively and ensure that all risks taken fall within acceptable norms.
1.4.1. Risk Management Framework and Responsibilities In order to integrate the risk management in its day- to-day activities, the risk management framework was prepared and approved by the Board of Directors in 2009. It consists of strategy, process, infrastructure and environment which help business to make intelligent/well-informed risk-taking decisions prior to committing limited resources and in monitoring the outcomes of these decisions.
Within the framework of defining the Bank’s risk management policies and ensuring that the risk strategy is well implemented, the Risk Management Committees were created. They consist of different committees which report to the Directorate-General and have also a communication line with the Board Sub-Committees. Those committees are the followings: Credit Committee, Assets and Liabilities Committee (ALCO), Operational Risk Committee.
Among the responsibilities of the Risk Management Committees are to: • Review the adequacy and efficiency of the risk policies, procedures, practices and controls; • Identify and regularly monitor all key risks; • Identify the build up and concentration of risk; • Develop mitigation strategies to ensure the optimum management of the risk.
In addition to foresaid committees, the activities of the Risk Management Department are carried out by the following units: Credit Risk Management, Workout and Recovery, Legal and Compliance.
1.4.2 Achievements of the year
Credit Risk Management • During the year under review, the “Credit Policy” was prepared and approved by the Board of Directors; authorities of credit approvals from Bank officers to the level of the Board have been defined; • The “Credit Risk Rating System” has been initiated. The Credit Risk Management Unit has started the 2009 Annual Report 35
rating for every project which has to be examined by the Credit Risk Committee and proposes the loan pricing. The next step consists in rating the whole portfolio of the Bank and come up with its risk profile; • In order to ensure that BRD’s activities are in compliance with social and environmental standards and applicable laws, the BRD’s Social and Environmental Management System was developed, approved by the Management of the Bank and implemented. It integrates social and environmental risk management into the Bank’s business process (evaluation of social and environmental risks, proposal of mitigation measures, responsibilities of different Units/committees); • The Credit Risk Management Unit continued to assess risks, proposes mitigation measures for every project which had to be examined by the credit risk committee and participated in all meetings held during the year 2009; • Analysis and reporting on credit risk concentration were done for December 2008 and June 2009.
Operational Risks Management (ORM) • Different meetings were held during the year 2009 and tools which will serve to identify, assess and monitoring of operational risks were developed.
Assets and Liabilities Risks Management (ALRM) • The Assets and Liabilities Committee (ALCO) held four meetings for the examination of documents relating to BRD’s assets and liabilities (BRD’s pricing system, Quarterly financial statements of the Bank, Bank’s treasury and review on audit report of BRD’s accounting and IT systems). 36 2009 Annual Report
1.5 Development Impact
BRD in Microfinance
The Rwandan Development Bank is committed to promoting the development of agriculture and livestock by financing cooperatives, associations and refinancing microfinance institutions. In 2009 the Bank approved funds worth RWF 3 Billion to cooperatives and associations and RWF 210 Million to the refinancing of microfinance institutions. Approved projects in microfinance will create 135 jobs and directly impact the lives of the 20,059 members of those cooperatives and associations. Furthermore the Bank also refinanced three microfinance institutions that have 29,159 clients in total. With its microfinance window, the Bank directly and indirectly has an impact on the lives of rural people by creating jobs and other opportunities that improve their well-being and their development objectives that translate into the Vision 2020. 2009 Annual Report 37
Giciye Hydroelectric Plant Project site
In 2009 BRD approved worth RWF 1.4 Billion for the construction of a mini hydroelectric plant in Nyabihu district, Western Province on Giciye river for the benefit of Rwanda Mountain Tea.
This project protects the environment because it will reduce CO2 emissions since the tea factory will move away from combustion of firewood or diesel. Furthermore the project will also electrify the rural area with its excess electricity and provide job opportunities. With a total project cost of RWF 4 Billion, Rwanda Mountain Tea will be able to have a more reliable and environmentally friendly electricity generation that will reduce their cost of production and generate more electricity for the surrounding communities. 38 2009 Annual Report
Financing of the milk value chain
Since more than 80% of the Rwandan population lives in the rural area, agriculture and livestock play a big role in improving peoples’ lives in the rural areas. The Rwanda Development Bank promotes the development of the milk value chain by financing cattle farming and milk processing. In 2009 the Bank’s portfolio in livestock farming has attained RWF 1.9 Billion. In the framework of reducing poverty in rural areas, the Government of Rwanda and BRD have implemented the construction of milk collection centers in the country. The plan earmarked the construction of 70 milk collection centers and so far 21 milk collection centers are being built for a cost of RWF 35 Million each. The bank also co-financed the construction of an “Ultra High Temperature” (UHT) Milk processing plant for RWF 1.5 Billion. These two projects are very crucial to the country because they promote the development of the whole value chain in the dairy industry by linking cattle farmers with milk processing plants. With such a project, farmers can fetch more revenues from their milk production and in turn increase their standard of living. Furthermore, these projects will give to the Government of Rwanda the means to implement its children milk feeding scheme effective in 2010. 2009 Annual Report 39
Financing of Coffee Plantations and Washing Stations
The coffee sector is one of the priority sectors of the Rwandan Economy. BRD strongly promotes export sectors for their contribution to foreign exchange generation and the creation of jobs in the rural areas. Before the Rwandan coffee was unknown in the specialty coffee industry but today , Rwandan has become a source of some of the finest coffees in East Africa. BRD is proud to be behind the development of the sector and it is continuing to promote it by financing the coffee value chain and providing technical assistance through training to co-operatives and associations.
To date the Bank has a total portfolio of around RWF 3.9 Billion in the coffee sector and has financed the construction of 31 coffee washing stations. In 2009 BRD approved coffee projects worth RWF 3.6 Billion and financed the construction of 18 new coffee washing stations. 40 2009 Annual Report
ii FINANCIAL OVERVIEW OF THE BANK
2.1 Financial overview
Operational Performance The Bank in the financial year 2009 registered great strides in key operational areas. Operational activities during the year were carried out against a difficult business environment primarily characterized by a macro economic slowdown and volatile export markets that affected key sectors of our loan portfolio.
Despite the difficult economic and market conditions, the bank’s lending operations during the year continued on the positive trend, with cumulative loan approvals increasing by 152% to RWF 25.75 Billion from RWF 10.24 Billion in 2008 largely channeled in support of agriculture, commercial real estates, and Hotels, accounting for over 50% of the cumulative approvals. Similarly loan approvals by the Board in 2009 reached an unprecedented level of Rwf 15.29 billion against Rwf 7 Billion registered in 2008, an increase of 118%. Cumulative commitments, representing signed loans increased by 118% to RWF 9.12 Billion as at end 2009 compared to RWF 4.20 Billion in 2008 following the signing of Loan Agreements. On the same trend, despite the significantly higher level of approvals, disbursements in the year amounted to RWF 14.82 Billion with a growth rate of 123% from RWF 6.6 Billion in 2008.
On a cumulative basis, the bank’s lending to the private sector accounted for 98% of the loan portfolio, while parastatals and government agencies accounted for the remaining 2%. The majorities of private sector beneficiaries are SME-sized and split as corporates 50%, private individuals 31% and cooperatives 17%. BRD so far has operational presence in all the 4 provinces in keeping with its strategic objective of establishing operational presence and widening its coverage in the entire country.
Financial Performance Management The improved operational performance in 2009, has led to a further strengthening of the financial base of the Company, following modest growth in operating profit, total assets and shareholders’ funds.
Gross income for the year ended December 31, 2009, grew 45% to RWF 6.6 Billion from RWF 4.6 Billion largely on account of a significant gain on the disposal of equity shares in Sorwathe and an increase in non-interest income. Fees and commissions increased to RWF 158 million from RWF 64 million in 2008, up by 147% mainly due to new investments. Interest earned during the period from loans rose 37% to RWF 4.3 Billion from 3.2 Billion in 2008. 2009 Annual Report 41
Asset Quality Asset quality continued to improve during 2009, with gross nonperforming loans (NPLs) declining to 7.49% of the total loan portfolio from 12.24% in 2008. Net NPLs declined by 17% to RWF 1.87 Billion from RWF 2.35 Billion at the end of 2008. As reported in the notes to the audited accounts, the company accounts for impairment provisions by following the Central Bank Regulation on provisions. Impairment provisions on loans stood at RWF 830 M Rwf reporting a decrease of 2% from 845 M Rwf in 2008 due to recoveries of previously provisioned loans from borrowers who were long in arrears.
Operating Expenses Operating expenses however, rose by 22% in 2009 to RWF 1.91 Billion as compared to RWF 1.56 Billion in 2008 driven largely by the relative increase in staff and general administration costs. Staff cost increased by 25% to RWF 1.10 Billion due largely to the increase in staff salaries. These expenses were necessarily incurred as part of the implementation of the human capital development programme and relative alignment of the payroll to the market. Other operating expenses increased by 19% to RWF 795 million due largely to the cost of the ongoing institutional reforms including consultancy services for systems development and computerization. However, cost-to-income ratio (efficiency ratio) at 74% dropped by 6% which was a good signal in cost control.
Net Profit Net profit of RWF 1.59 Billion grew by 87% compared with the net profit of RWF 845 million reported in 2008, primarily due to the effect of the gain on disposal of equity shares in Sorwathe to the tune of RWF 724 million. The bank’s operating net profit declined 1% .
Balance Sheet Total Assets grew by 19% during the year to stand at RWF 48.13 Billion as at 31st December 2009, due largely to the buildup in customer loans and improved liquidity resulting from the conversion of Government debt into equity (Acquisition of 18.18% shares owned by ADC and DEG) of RWF 3.22 Billion.
Key profitability indicators, improved during 2009, with Return on Equity (ROE) and Return on Assets (ROA) increasing to 11% and 3% from 6% and 2% respectively.
Dividends Our performance in 2009 permits us to recommend a dividend per paid up ordinary share of RWF 57.51, an increase of 117% from the previous year. 42 2009 Annual Report
Resource Mobilization Activities The bank strives to raise funds from both local and international sources to support its lending activities at the lowest possible cost. However, the bank only managed to borrow slightly over RWF 10 Billion, representing a 69.52% drop from RWF 18.63 Billion in 2008. The performance on borrowings was recorded on the back of tighter credit market global liquidity crunch and International DFI’s risk aversion, occasioned by the global financial market. The amount borrowed comprises a euro denominated loan facility from European Investment Bank of Euro 4.65 Million and the rest being in RWF.
During 2009, the Bank negotiated with the African Development Bank (AfDB), Agence Française Development (AFD), East African Development Bank (EADB), Swedfund, Afreximbank, Shelter Afrique, Heifer International and Netherlands Development Corporation (FMO) for lines of credit for on lending purposes and a technical assistance component focusing on the area of business development, HR capacity development and financial management. Significant progress has also been made in that regard.
The Year Ahead The BRD will continue to increase spending on developmental interventions, while enhancing its own financial sustainability. The funding required for projected disbursements will be supported by the balance sheet and borrowings mentioned above. The bank is also in preliminary discussions with the Capital Markets Advisory Council on placing some of its equity investments in a Capital Market Fund and creating a BRD bond to raise more funds.
To improve its forecasting and budget planning, the Finance Department is implementing a fully integrated budget and financial reporting toolkit. This will allow for better management of performance. 2009 Annual Report 43
2.2 Report of the Independent Auditors
Report on the Financial Statements We have audited the accompanying financial statements set out on pages 10 to 40 of Banque Rwandaise de Developpement, which comprise the balance sheet as at 31 December 2009 and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Directors’ responsibility for the Financial Statements The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
NON COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) The financial statements are not in compliance with International Financial Reporting Standard 7 (IFRS 7) on ‘Financial Instruments : Disclosures’ as the required disclosures on financial instruments with respect to market risk (including foreign exchange risk, interest rate risk and price risk) have not been made in the financial statements. The effect of this non compliance has no effect on the operating results of the company. 44 2009 Annual Report
LIMITATION OF SCOPE We were unable to verify equity investments amounting to Rwf 504.4 million in absence of supporting documents and independent confirmations. There were no satisfactory alternative audit procedures that we could adopt to confirm that equity investments are fairly stated.
QUALIFICATIONS • Included in accounts payable is an amount of Rwf 509.4 million which has been long oustanding since 1998 and is unlikely to be paid. In our opinion, the liability should have been reversed, increasing profit before tax and net assets by that amount. • Included in trade and other receivables is an amount of Rwf 16.9 million which has been long outstanding since 1998 and is unlikely to be recovered. In our opinion, a provison for doubtful debt should have been made, reducing profit before tax and net assets by that amount. • There was an inadequate recording of rental income resulting in an understatement of income by Rwf 20.9 million.
Opinion Except for the above and for the effects of any adjustments in respect of the above matters, in our opinion the accompanying financial statements, give a true and fair view of the state of financial affairs of the company as at 31 December 2009 and of its results and cash flows for the year then ended in accordance with the International Financial Reporting Standards and the requirements of the Law Relating to Companies No. 07/2009 of 27/04/2009.
Report on other legal requirements As required by the Law Relating to Companies No. 07/2009 of 27/04/2009 we report to you, based on our audit, that: 1. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; 2. In our opinion proper books of account have been kept by the company, so far as appears from our examination of those books; and 3. The company balance sheet and income statement are in agreement with the books of account.
Certified Public Accountants 2009 Annual Report 45
2.3 Financial Statements
Balance Sheet
aSSeTS notes 2009 2008
Treasury operations and operations with banks and other financial institutions
Cash in hand 11 234 262 Balance with the Central Bank 11 414,808 63,112 Balance due from other banking institutions 12 1,774,727 917,489 Reverse repurchase agreements, loans and other overdrawn accounts 13 4,645,000 8,825,000 6,834,769 9,805,863
Operations with clients
Loans and advances to customers 14 33,035,650 22,666,836 Consumer loans 14 748,148 566,615 Leased assets 14 429,133 239,383 Non performing assets 14 1,877,828 2,349,027 36,090,759 25,821,861
financial instruments
Financial instruments held to maturity 29 215,697 234,614 Equity investments And investments in subsidiaries 29 3,530,060 3,332,886 3,745,757 3,567,500
Property, equipment and other assets
Intangible assets 19 16,915 9,098 Tangible assets 18 895,889 939,988 Accounts receivable 15 265,303 106,952 Other assets 16 7,712 6,134 prepaid expenses and income receivable 17 276,233 247,503 1,461,512 1,309,675
TOTal aSSeTS 48,132,797 40,504,899 46 2009 Annual Report
2009 2008 lIabIlITIeS notes Rwf ‘000 Rwf ‘000
Treasury operations and operations with banks and other financial institutions
Repurchase agreements, borrowings and other credit accounts 20 7,400,832 5,670,479 Other payables in transit 3,574 374 Interest payable 21 136,268 119,520 7,540,674 5,790,373
Operations with clients
Other operations with clients 22 13,113,406 11,832,039 Interest payable on operations with clinets 23 187,354 131,300 13,300,760 11,963,339
Other liabilities
Accounts payable 24 1,360,172 1,015,165 Accrued expenses and deferred income 25 60,038 54,782 1,420,210 1,069,947
Provision for contingent liabilities and enquiry
Subsidies and guarantee funds 26 11,891,665 8,643,686
TOTal lIabIlITIeS 34,153,309 27,467,345
ShaRehOlDeR’S eQUITY
Share capital 27 5,994,402 6,298,404 Retained earnings 2,023,482 1,311,385 Reserves and share premium 5,961,604 5,427,765
TOTal ShaRehOlDeRS’ eQUITY 13,979,488 13,037,554
TOTal lIabIlITIeS anD ShaRehOlDeRS’ eQUITY 48,132,797 40,504,899
Financing commitments and guarantees commitments for which there are 28 32,566,142 13,433,462 counter indemnities from customers 2009 Annual Report 47
Income Statement
2009 2008 notes Rwf ‘000 Rwf ‘000 Interest income 1 4,348,716 3,171,926 Income on lease contracts 6,067 1,011 Interest expense 2 (1,718,783) (1,353,103) Loss on credit risks 3 (125,814) (29,003) net Interest Income 2,510,186 1,790,831
non Interest Income
Fees and commission income 4 158,895 64,450 Fees and commission expense 5 (40,672) (63,774) Income from shareholdings 24,640 406,926 Exchange difference 6 24,543 41,475 Other income and banking operating expense 7 (12,153) 42,352 net non Interest Income 155,253 491,431 net banking Income 2,665,439 2,282,262 Staff costs (1,110,266) (888,467) Other operating expenses 8 (637,532) (531,668) Depreciation of property and equipment (158,402) (136,301) Other non banking income 9 51,222 93,544
Operating Profit 810,461 819,370
Income from sale of fixed assets and equity 10 774,855 26,436
Profit before tax 1,585,316 845,806
Corporate tax - - Profit for the year 1,585,316 845,806 48 2009 Annual Report
CashFlow Statement
2009: Rwf ‘000 2008: Rwf ‘000 OPeRaTInG aCTIVITIeS profit before tax 1,585,316 845,806 adjustments: Depreciation on property plant and equipment 172,189 136,301 provisions for loss on credit 125,814 29,003 Foreign exchange differences (24,543) (41,475) 1,858,776 969,635
aDJUSTMenTS In WORKInG CaPITal ChanGeS Increase in loans to customers (10,268,898) (3,726,290) Increase in other assets (151,837) (206,001) Decrease (increase) in other liabilities and provisions 350,263 (1,199,750) Increase in customer deposits - (723,854) Increase in operations with clients 1,337,421 - Cash used in operations (8,733,051) (5,855,895)
net cash (used in) operating activities (6,874,275) (4,886,260)
InVeSTInG aCTIVITIeS purchase of property and equipmenr (131,545) (125,281) purchase of shares (197,174) (869,328) Subscriptions in treasury bills and bonds - (650,000) Matured treasury bills and bonds 18,917 517,597 Disposal of shares 1,411,692 - Disposal of property and equipment 281,744 32 net cash from (used in) investing activities 1,383,634 (1,126,980)
fInanCInG aCTIVITIeS (Decrease) increase in long term loans 1,750,301 5,152,789 Increase (Decrease) in investment funds 3,247,979 (859,279) (Decrease) Increase in equity (2,478,733) 7,746,266 net cash from financing activities 2,519,547 11,769,776
(Decrease) Increase in cash and cash equivalents (2,971,094) 5,756,536
MOVeMenT In CaSh anD CaSh eQUIValenTS At start of year (note 13) 9,805,863 4,049,327
(Decrease) Increase in cash and cash equivalents (2,971,094) 5,756,536 at end of year (note 13) 6,834,769 9,805,863 2009 Annual Report 49
SHAREHOLDERS OF THE RWANDAN DEVELOPMENT BANK ON DECEMBER 31ST 2009
nUMbeR Of nOMInal ShaRe hOlDeRS PeRCenTaGe ShaReS ValUe
GROUP a ShaReS gOUVERNEMENT RWANDAIS 2,716,067 2,716,067,000 38.80% OFFICE DES CAFES (Office des Cultures Industrielles du 102,918 102,918,000 1.47% Rwanda chargé du café) OFFICE DES CAFES (Office des Cultures Industrielles du 27,694 27,694,000 0.40% Rwanda chargé du café) CAISSE SOCIALE DU RWANDA 2,230,137 2,230,137,000 31.86% Total Group a shares 5,076,816 5,076,816,000 72.53%
GROUP b ShaReS SONARWA 228,507 228,506,627 3.26% BANqUE COMMERCIAL DU RWANDA 60,636 60,636,000 0.87% BANqUE DE KIgALI 60,636 60,636,000 0.87% SOMIRWA 12.839 12.839.000 0.18% BRALIRWA 24,755 24,755,000 0.35% RWANDEX 4,943 4,943,000 0.07% TAIDIN JAFFER 7,835 7,835,000 0.11% LA RWANDAISE 2,463 2,463,000 0.04% TRANSINTRA - RWANDA 1,307 1,307,000 0.02% MURRI FRERES 1,089 1,089,000 0.02% BENATAR ALhADEFF & CO 907 907,000 0.01% AgENCE MARITIME INTERNATIONAL S.A 731 731,000 0.01% ENgECO 990 990,000 0.01% ESMAIL ET FILS 731 731,000 0.01% NAhV RWANDA 990 990,000 0.01% RAJANS 731 731,000 0.01% SIRWA 990 990.000 0.01% CAISSE FRANCAISE DE DEVELOppEMENT 274,287 274,287,000 3.92% DEg - Deutsche Investitions (KFW Banking group) 270,179 270,179,350 3.86% FMO (Entrepreneurial development bank of the Netherlands) 194,024 194,024,000 2.77% Belgian government (AgCD - Administration generale de la 597,102 597,101,844 8.53% co-operations au developpem ThE BANK OF TOKyO LTD 18,057 18,057,000 0.26% Unsubscribed Shares 158,476 158,476,180 2.26% Total Group b Shares 1,923,205 1,923,205,000 27.47% TOTal Of a anD b ShaReS 7,000,021 7,000,021,000 100% 50 2009 Annual Report
NOTES TO ThE FINANCIAl STATEMENTS
2009: Rwf ‘000 2008: Rwf ‘000 1. InTeReST InCOMe Interest received on reverse repurchase agreements and loans 637,486 470,775
Interest on equipment loans 3,606,165 470,775 Interest on consumer loans 23,218 2,701,151 Interest on finance lease 21,124 - Commissions on financing commitments to customers 31,853 - Interest on financial instruments held to maturity 28,870 - 4,348,716 3,171,926
2. InTeReST eXPenSe Interest on MINEDUC funds 13,931 Interest on KFW I,II,III & IV 42,125 43,554 Interest on ADC funds 181,208 Interest on BEI III & IV 366,966 248,261 Interest on AFD 8,859 424 Interest on pppMER Funds 96 282 Interest on BRD-pME Funds 139,107 47,366 Interest on FAD III 223,289 242,060 Interest on IDA-BNR 9,035 13,690 Interest on “Facilite de Refinancement preferentiel” 77,367 50,499 Interest on FIDA/pDRCIU 10,981 10,891 Interest on Social Security Funds 278,389 267,612 Interest on RAMA Funds 155,942 151,058 Interest on government Funds 211, 350 277,315 Other interest expense 138 - 1,718,783 1,353,103
3. lOSS On CReDIT RISK GaInS Write back of provisions on non performing loans 940,634 671,067 Recovery on written off loans 7,898 32,847 948,532 703,914 lOSSeS Specific provision for bad debts 926,192 624,072 Bad debts written off 148,154 108,845
net losses on credit risk (125,814) (29,003) 2009 Annual Report 51
2009: Rwf ‘000 2008: Rwf ‘000 4. feeS anD COMMISSIOnS InCOMe Commissions on loan services 155,499 63,462 Other commissions on rendered services 3,396 988 158,895 64,450
5. feeS anD COMMISSIOnS eXPenSe Commissions on financing commitments from banks and other FI 15,390 16,054 Other commissions from the central bank 1,999 3,049 Other expenses on rendered services 14,912 13,162 Commissions on guarantee commitments from banks and other FI 8,371 31,509 40,672 63,774
6. eXChanGe DIffeRenCe Foreign exchange gain 326,084 64,559 Foreign exchange loss (301,541) (23,084) net foreign exchange gain 24,543 41,475
7. OTheR InCOMe anD banKInG OPeRaTInG eXPenSe Other income from operations with clients 3,241 46,170 Other banking expenses (15,349) (3,917) (12,153) 42,352
8. OTheR OPeRaTInG eXPenSe Urban tax 106,791 54,781 premise expenses 102,578 28,556 Compensation and external service fees 101,665 101,893 publicity and advertising 286,279 249,251 professional, legal and consultancy fees 36,283 46,584 general expenses 3,936 50,603 637,532 531,668
9. OTheR nOn banKInG InCOMe Income from leased assets 39,378 39,487 Incidental income 723 1,977 grants received 11,121 52,080 51,222 93,544
10. InCOMe On Sale Of fIXeD aSSeTS anD eQUITY InVeSTMenTS gain on disposal of equity investments 730,200 - gain on disposal of fixed assets 44,655 26,436 774,855 26,436 52 2009 Annual Report
2009: Rwf ‘000 2008: Rwf ‘000 11. CaSh In hanD anD CenTRal banK Cash in hand 234 262 Balances with National Bank of Rwanda BNR FRW 66,194 9,307 BNR USD 3,864 43,812 BNR EUR Special Account BEI III 612 605 BNR USD Special Account FAD III 6,914 6,777 BNR USD FIDA/pDRCIU 2,657 2,610 BNR EUR Special Account BEI IV 334,567 1 414,808 63,112
12. DePOSITS WITh banKS anD OTheR fInanCIal InSTITUTIOnS group BK - FRW 80,914 25,777 BK Stabex Funds - Foredom 28,694 23,953 BK - Special Acc. Milk Collection Centre 150,259 - BK - USD DEg Special Fund 35,078 34,321 BK - FRW Antenne Musanze 314 812 BK - FRW Antenne Rusizi 172 1,449 BCR - FRW 374,039 121,048 BCR FRW - AFSR FOREDEM 129 144 BCR EUR 13,249 - BCR - USD 178,722 2,594 FINA BANK - FRW 178,722 2,594 COgEBANqUE - FRW 362,827 192,335 COgEBANqUE - FOREDEM 236,249 110,393 COgEBANqUE - USD 194,257 29,272 COgEBANqUE - ROpARWA FOREDEM - 21 BCDI - FOREDEM - 1,581 ECOBANK FRW 12,345 86,952 ECOBANK EUR 2,243 166,310 BANCOR - FRW - 42,885 BANCOR USD - 281 BANCOR EUR - 55,932 ACCESS FRW 77,719 - ACCESS USD 229 - ACCESS EUR 1,088 - BpR - Banque populaire du Rwanda 4,465 1,504 ZIgAMA CSS 11,322 7,719 1.774,727 917,489 2009 Annual Report 53
2009: Rwf ‘000 2008: Rwf ‘000 12. DePOSITS WITh banKS anD OTheR fInanCIal InSTITUTIOnS (COnT’D...) Company BK - FRW 80,914 25,777 BK Stabex Funds - Foredom 28,694 23,953 BK - Special Acc. Milk Collection Centre 150,259 - BK - USD DEg Special Fund 35,078 34,321 BK - FRW Antenne Musanze 314 812 BK - FRW Antenne Rusizi 172 1,449 BCR - FRW 242,114 121,048 BCR FRW - AFSR FOREDEM 129 144 BCR EUR 13,249 - BCR - USD 178,722 2,594 FINA BANK - FRW 362,827 192,335 COgEBANqUE - FRW 236,249 110,393 COgEBANqUE - FOREDEM 194,257 29,272 COgEBANqUE - USD 10,413 10,206 COgEBANqUE - ROpARWA FOREDEM - 21 BCDI - FOREDEM - 1,581 ECOBANK FRW 12,345 86,952 ECOBANK EUR 2,243 166,310 BANCOR - FRW - 42,885 BANCOR USD - 281 BANCOR EUR - 55,932 ACCESS FRW 77,719 - ACCESS USD 229 - ACCESS EUR 1,088 - BpR - Banque populaire du Rwanda 4,465 1,504 ZIgAMA CSS 11,322 7,719 1,642,802 917,489 54 2009 Annual Report
13. ReVeRSe RePURChaSe aGReeMenTS, lOanS anD OTheR aCCOUnTS 2009 2008 Rwf ‘000 Rwf ‘000 Term deposits with COgEBANqUE 270,000 2,075,000 Term deposits with Access / Bancor 1,000,000 1,600,000 Term deposits with Finabank 700,000 - Term deposits with BCR - 1,000,000 Term deposits with Bk 2,675,000 2,500,000 Term deposits with BpR - 1,650,000 4,645,000 8,825,000
For the purpose of the cash flow statement, the period / year end cash and cash equivalents comprise the following: Cash in hand 234 262 Balance with rthe central bank 414,808 63,112 Deposits with banks and financial institutions 1,774,727 917,489 Reverse repurchase agreements, loans and other accounts 4,645,000 8,825,000 6,834,769 9,805,863
14. lOanS anD aDVanCeS TO ClIenTS 2009 2008 Rwf ‘000 Rwf ‘000 a) loans and advances i) Current / normal (Loans to clients) 22,609,343 19,977,707 ii) To monitor (Loans to clients) 10,426,307 2,689,129 33,035,650 22,666,836
iii) non performing loans Doubtful (Short term, Medium term and Long term) 260,952 1,409,616 Litigious (Short term. Medium term and Long term) 433,704 453,957 Contentious (Short term, Medium term and Long term) 2,014,171 1,330,538 2,708,827 3,194,111
less: Provision for impairment (830,999) (845,084) net non perfoming loans 1,877,828 2,349.027
b) Provision for impaired loans and advances The movement in provisions for impairement was as follows: Movement in provisions At start of year 845,084 801,104 Additional provision in the year 141,967 185,672 2009 Annual Report 55
Recoveries (7,898) (32,847) net additional provision in the year 134,069 152,825 Write offs during the year (148, 154) (108,845) at end of the year 830,999 845,084 c) loans to staff 748,148 566,615 d) leased assets 429,133 239,383 e) Concetration Economic sector risk concetrations within the customer loan portfolio were as follows: 2009 2008 government 0.00% 0.00% Agriculture 11.70% 24.50% Manufacturing 27.10% 20.50% Trade and commerce 8.34% 3.50% Transport, ware housing and communications 8.50% 0.01% Building and construction 6.50% 5.50% Financial intermediation 3.50% 5.20% hotels and restaurants 20.40% 17.00% Education 10.40% 19.60% Others 3.56% 4.19% 100.00% 100.00% 15. aCCOUnTS ReCeIVable 2009 2008 Rwf ‘000 Rwf ‘000 Due from government 125 125 Other amounts due from staff 9,307 7,770 Various other debtors 58,709 57,059 Commission and unpaid promissory notes 2,675 3,047 Advance of guarantee 1,226 1,226 Advances on different works and purchase contracts 202,868 52,172 BRD - Development Funds 13,312 - provision for doubtful debts (22,919) (14,447) 265,303 106,952
16. aCCOUnTS ReCeIVable Office stationeries stock 6,397 5,568 Furniture maintenance stock 666 426 Stamps 109 140 7,172 6,134 56 2009 Annual Report
17. PRePaID eXPenSeS anD InCOMe ReCeIVable 2009 2008 Rwf ‘000 Rwf ‘000 Group Receivable income 184,975 197,053 prepaid expenditure 91,258 50,450 276,233 247,503
Company Receivable income 184,975 197,053 prepaid expenditure 84,058 50,450 269,033 247,503
18. PROPeRTY, PlanT anD eQUIPMenT For the year ended 31st December 2009
furniture and buildings Total equipment Rwf ‘000 Rwf ‘000 Rwf ‘000 Cost At start of year 1,274,217 663,364 1,937,581 Additons 27,045 104,500 131,545 Disposals - (158,114) (158,114) At end of year 1,301,262 609,750 1,911,012
Depreciation At start of year 559,247 438,346 997,593 Disposal - (140,872) (140,872) Charge for the year 61,941 96,461 158,402 At end of year 621,188 393,935 1,015,123 net book value At end of year 680,074 215,815 895,889
For the year ended 31st December 2008 Cost At start of year 1,274,217 541,517 1,815,734 Additons - 121,879 121,879 Disposals - (32) (32) At end of year 1,274,217 663,364 1,937,581
Depreciation At start of year 515,022 351,898 866,920 2009 Annual Report 57
Disposal - (32) (32) Charge for the year 44,224 86,481 130,705 At end of year 559,246 438,347 997,593 net book value At end of year 714,971 225,017 939,988
19. InTanGIble aSSeTS Cost At start of year 183,190 179,789 Additions 21,604 3,401 At end of year 204,794 183,190 amortisation At start of year 174,092 168,695 Charge for the year 13,787 5,397 At end of year 187,879 174,092 net book value 16,915 9,098
20. ReVeRSe RePURChaSe aGReeMenTS, bORROWInGS anD OTheR aCCOUnTS 2009 2008 Rwf ‘000 Rwf ‘000 IDA Rural project 348,150 397,002 Refinancement project d’Investissement 2,021,028 1,259,823 FRp Ech - Annee - - BEI III & IV 5,031,654 2,104,767 Fonds MINECOFIN - 1,908,887 7,400,832 5,670,479
21. InTeReST PaYable Interest payable to BEI, II, III & IV 136,268 119,520
22. OTheR OPeRaTIOnS WITh CUSTOMeRS KFW I, II, III & IV (Less than 1 year) 439,299 456,126 FONDS FIFApI-Roparwa FOREDEM 892,581 892,581 FAD II & II (less than 1 year) 3,592,252 3,904,622 AFD 12,161 13,513 MINAgRI Funds 2,339,929 1,885,260 FONDS SUISSE gERES 18,517 18,517 CAISSE SOCIALE DU RWANDA I, II & IV (Less than 1 year) 1,912,780 2,709,432 FONDS pADL gAKENKE 322,468 - RAMA 2,200,000 1,600,000 AppUI MICRO-REALISATION BRD-pME 22,578 351,988 58 2009 Annual Report
IFAD C pppMER 31,328 - Funds - FIDA/pDRCIU 274,522 - Funds for promotion of education 1,054,991 - 13,113,406 11,832,039
23. InTeReST PaYable On OPeRaTIOnS WITh ClIenTS Interest payable to FAD I & II 73, 475 79,741 Interest payable to AFD 50 59 Interest payable to Fond Suisse gere 591 591 Interest payable for Micro-Realisation 3,973 3,973 Interest payable to CSR 58,385 20,249 Interest payable to FIDA-pDRCIU 37,668 26,687 Interest payable to Fg BpC II 13,212 - 187, 354 131,300
24. aCCOUnTS PaYable Group 2009 2008 Rwf’ 000 Rwf ‘000 VAT payable 9,197 1,575 Amounts due to the government 549,286 1,823 SFAR-FOREDEM - 265 pAyE payable 45,254 32,761 FARg payable 615 542 With holding tax payable 41,118 70,941 NSSF payable 15,142 12,323 Mutual Aid Fund 6,644 612 INTEgO ASSOCIATION 474 10 Salaries payable 340 6,369 Dividend payable 25,046 37,013 Current Account DEg 13,090 12,230 payable to various suppliers of goods and services 20,179 18,019 Mortgage application cost 293,458 261,031 Advances on Service commissions 45,228 17,680 Other liability accounts 242,646 526,607 Disbursements BRD-Micro Realisation 15,132 15,133 Milk collection center 36,280 - FAgACE - guarantee commissions 1,044 - Technical assistance - FOREDEM - 232 1,360,173 1,015,166 2009 Annual Report 59
Company 2009 2008 Rwf’ 000 Rwf ‘000 VAT payable 9,197 1,575 Amounts due to the government 549,286 1,823 SFAR-FOREDEM - 265 pAyE payable 45,254 32,761 FARg payable 615 542 With holding tax payable 41,118 70,941 NSSF payable 15,142 12,323 Mutual Aid Fund 6,644 612 INTEgO ASSOCIATION 474 10 Salaries payable 340 6,369 Dividend payable 25,046 37,013 Current Account DEg 13,090 12,230 payable to various suppliers of goods and services 20,179 18,019 Mortgage application cost 293,458 261,031 Advances on Service commissions 45,228 17,680 Other liability accounts 239,250 526,607 Disbursements BRD-Micro Realisation 15,132 15,133 Milk collection center 36,280 - FAgACE - guarantee commissions 1,044 - Technical assistance - FOREDEM - 232 1,356,777 1,015,166
25. aCCRUeD eXPenSeS anD DefeRReD InCOMe 2009 2008 Rwf’ 000 Rwf ‘000 payable expenses 50,031 53,363 Income received in advance 10,007 1,419 60,038 54,782
26. SUbSIDIeS anD GUaRanTee fUnDS grants from MINECOFIN-Belgium Coop. for capacity building and operation cost 131,543 418,073 guarantee funds 2,574,155 2,022,530 Investment funds 743,188 435,344 government funds 6,861,469 5,585,167 Technical assistance funds 197,423 182,572 FONDS COOp. Belge Agricole & Belge Retrocedes IMFs 1,383,887 - 11,891,665 8,643,686 60 2009 Annual Report
27. ShaRe CaPITal 2009 2008 authorised Rwf’ 000 Rwf ‘000 7,000,021 (2008:7,000,021) ordinary shares of RWF 1,000 each 7,000,021 7,000,021 Issued and fully paid 5,994,402 (2008: 6,298,404) ordinary shares of RWF 1,000 each 5,994,402 6,298,404
28. Off balanCe SheeT fInanCIal InSTRUMenTS, COnTIGenT lIabIlITIeS anD COMMITMenTS 2009 2008 Contigent liabilities Rwf’ 000 Rwf ‘000 Financing commitments received 1,265,820 740,820 guarantee commitements received 22,142,472 8,488,564 23,408,292 9,229,384 Commitments Financing commitments given 9,157,850 4,204,078 32,566,142 13,433,462
Commentary on contigent liabilities Financing commitements and guarantees are generally written by the bank to support performance by customers who are in significant financial difficulties and have a high probability that the customers will not meet their repayment obligations. The bank will only be required to meet these obligations in the event of the customer’s default. These obligations are accounted for as off balance sheet transactions and disclosed as contigent liabilities.
The company is a defendant in various legal actions, which in the opinion of the directors, after taking appropriate legal advice, the outcome of such actions will not give rise to any significant loss.
Commitments Commitments to lend are agreements to lend to a customer in future, subject to certain conditions. Such commitments are normally made for a fixed period. The bank may withdraw from its contractual obligation for the undrawn portion of agreed credit limits by giving reasonable notice to the customer.
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