Rwanda mulling credit guarantee fund to encourage lending to mining sector
Rwanda is mulling over the establishment of a credit guarantee fund to encourage commercial banks to increase lending to the mining sector.
Minister of State for Mining Evode Imena says the development of mining projects has been hampered by commercial banks’ reluctance to extend credit facilities to the sector, owing to its high inherent risk.
The envisaged guarantee fund will cushion banks against this risk, thus encourage funding to the sector.
“Growth of the mining sector is being held back by access to finance challenges. We believe a credit guarantee fund is likely to see banks increase lending to the sector,” says Imena.
He adds that the concept of a guarantee fund has already been developed and is being reviewed by the Ministry of Finance and Economic Planning.
The credit guarantee fund, which will be established with the help of the World Bank, will have an initial capital base of $40-million.
The fund’s objective is to stimulate lending to the mining sector by reassuring lenders that, in the event of default, the fund will provide compensation for part of the loss incurred.
The fund is deemed necessary, owing to the high rate of loan applications from mining project developers rejected by commercial banks. Mining is a capital-intensive sector and it can take many years for returns on investments to be recouped.
According to the National Bank of Rwanda’s 2015 Monetary Policy and Financial Stability Statement, commercial banks rejected 96% of loan applications received from the mining sector that year, up from 68% in 2014. Notably, one bank extended over 70% of all loans to the mining sector.
Besides the sector’s inherent risk, commercial banks are also reluctant to extend loans to mine project developers, owing to a lack of high- quality feasibility studies that give a clear picture of the quality of mineral projects to inform the profitability of a mining venture.
Comments
The
content
you are trying to access is only available to subscribers.
If you are already a subscriber, you can Login Here.
If you are not a subscriber, you can subscribe now, by selecting one of the below options.
For more information or assistance, please contact us at subscriptions@creamermedia.co.za.
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation