Opportunities in the EAC Financial Sector

1. Opportunities in the EAC Financial Sector Ms. Vivian Kayitesi Acting Head of Investment Promotion and Implementation Rwanda Development Board (RDB)

2. OUTLINE • Overview of EAC financial sector • Specific country overview • Investment opportunities

3. EAC- compelling market • Market size of 130 million people • GDP growth rate above 6%, some have been at high single digit, while others double in recent past (e.g. TZ 5 year average above 7.5% and Rwanda a first –time double digit in 2008) • Financial sector key catalyst for growth given the link between savings, access to credit and poverty reduction

4. EAC- compelling market • Credit lines still lagging behind-its estimated that only 4% of Africans have access to credit and less than 15% own bank accounts • Need for wider and deeper access to financial services • Focus on innovative instruments for mobilizing long-term savings (Rwanda’s provident fund, Kenya’s SACCOs), credit targeting SMEs, vibrant capital markets, private equity firms remain critical to support economic development • Simultaneous growth of the entire sector because of the inter-relations

5. Economic growth developments in EAC (annual growth rates) Source: IMF, World Economic Outlook

6. Major Banking institutions in EAC • Region has experienced considerable expansion, inter-regional and otherwise • Mixture of foreign, regional and locally owned banks • Some international banks eg Barclays, Citibank, Standard chartered, Stanbic etc • Regional and local banks playing key role in the region e.g. KCB, Equity, Bank de Kigali etc • ROE well over 20% (IMF) • Challenges: high interest rates and insufficient creditor information

7. Others • Insurance still young industry less than1% of global trade share • Uganda (21), Kenya (44) Burundi (5), Rwanda (8), Tanzania (18) • Regulatory framework improving • Need for increased scope of products available • Most EAC countries now have capital markets, with Rwanda newest

8. COUNTRY OVERVIEW

9. Overview -Burundi • A structural reform programme aimed at promoting sustainability and broad based economic growth: • Financial sector reform • Regional integration • Privatization of state assets • Positive economic outlook – GDP growth • Agriculture as mainstay of Burundian economy • Numerous reforms undertaken in past few years – taxation, foreign exchange, labour and business laws and the recent promulgation of the VAT tax • Burundi IPA launched in July 2009 • Regulatory Framework - increase in minimum capital requirements for banks in 2009 to 5BN

10. Overview -Kenya • Region’s largest stock exchange, 44 commercial Banks, 15 MFIs, Nairobi Stock Exchange, 40 licensed insurance companies • Increased income per capita from US$400 to US$ 630. • Initiation of a Financial and Legal Sector Technical Assistance Credit (FLSTAC) to support Formulating a financial sector development strategy • Regulatory reforms – operationalization of the Credit Reference Bureau (informational capital), licensing of deposit taking MFIs (2008)

11. Overview -Kenya • Stability in sector growth: deposit accounts increase from 2.6M (2008) to 8.4M (end 2009) • Deposits – doubled from 545BN (USD7.2BN) to 1,065BN (USD14BN) • Increase in gross loans – KSH 771BN (Dec 2008) to 783BN in Feb 2010

12. Over view - Rwanda • Most recent monetary policy reforms falls within the responsibility of the BNR (National Bank of Rwanda) • Other reforms - reduction of the Reserve Requirement Ratio, capital requirement • The formation of Rwandan Financial Sector Development Programme (FSDP) will cover the banking system, MFIs sector, Capital Markets development and modernize payment systems. • Key players – 8 commercial banks, 1 primary MFI and 1 Development Bank • Opportunities abound – only 12% of population has bank accounts (2007 statistics) • Legal and Judicial reforms (new Company’s act, secured transactions law, Insurance law, Intellectual property law etc), commercial courts • Introduction of a capital market (2007) and credit reference bureau (2010)

13. Overview -Tanzania • Liberalization of the financial sector - increased mobilization of financial resources, increasing competition in the financial market and enhancing quality and efficiency in credit allocation. • Emerging signs of a deepening of the financial sector - credit to private sector increased by 28% in 2009 • Insurance sector contributes to 2% of the GDP – Savings 15% • Growth in all sectors . Highest in Construction and Financial sector – 20% and 10% respectively. • Currently, the Dar es Salaam Stock Exchange is the only formal trading place for securities in Tanzania, where nine companies are listed.

14. Overview -Uganda The financial sector is regulated and supervised by Bank of Uganda through: • Financial Institutions Act 2004, Micro Deposit Taking Institutions (MDI) Act 2003 and Foreign Exchange Act 2004 • 15 commercial banks, 7 credit institutions, 3 micro finance deposit taking institutions, insurance companies and a securities exchange • Possible reduction of cost of financing – CRB commenced operations in 2009 • Impressive growth of 7% in 2008 (despite crisis) – led by financial services, transport and communication

15. Investment opportunities

16. Investment opportunities Banking Sector: • Specialized banking services – agricultural banks, export-import banks • Credit rating services • Investment and Corporate banking • Alternative financing • Expansion of mortgage financing • Capital market intermediaries

17. Thank You! Asanteni! Merci!