Rwanda - Third Banque Rwandaise de Developpement (BRD) Project

Document of The World Bank I 3 FOR OFFICIAL USE ONLY Report No. 4082-RW RWANDA STAFF APPRAISAL REPORT OF A THIRD IDA CREDIT TO THE BANQUE RWANDAISE DE DEVELOPPEMENT (BRD) March 1, 1983 FIllE COPY Eastern Africa Projects Department Industrial Development and Finance Division This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS US$ 1.0 = RwF 91.91 RwF 1.0 = US$0.010880 RwF 1.0 million = US$ 10,880 GLOSSARY OF ABBREVIATIONS BNR Banque Nationale du Rwanda - Central Bank BRD Banque Rwandaise de D6veloppement CCCE Caisse Centrale de Cooperation Economique CIDA Canadian International Development Agency CDI Centre de Developpement Industriel DEG Deutsche Entwicklungsgesellschaft EDF European Development Fund KfW Kreditanstalt fur Wiederaufbrau MINECOM Ministere de l'Economie et du Commerce MAGERWA Magasins Generaux du Rwanda SMEs Small and Medium Enterprises SOMIRWA Societe des Mines du Rwanda SSEs Small Scale Enterprises FISCAL YEAR January 1 to December 31  FOR OFFICIAL USE ONLY RWANDA BANQUE RWANDAISE DE DEVELOPPEMENT (BRD) STAFF APPRAISAL REPORT TABLE OF CONTENTS Page No. BASIC DATA I. THE ENVIRONMENT ...................................... 1 A. The Industrial Sector ..1............... Characteristics and Past Performance ............. 1 Industrial Policy .................. 2 Sector Issues ......................... 5 IDA's Strategy ........................ 5 B. The Small-Scale Enterprise Sector ................ 6 C. The Financial Sector . . 9 II. THE INSTITUTION .......... ........................... 11 A. Institutional Aspects . .................... 11 Background ....................................... 11 BRD's Objectives and Role . . 11 Share Capital and Ownership . . 12 Board of Directors . . 12 Management, Organization and Staffing ............ 12 Operating Policies and Procedures . . 14 BRD and SSEs ..................................... 17 B. Operations ....................................... 19 Portfolio ........................................ 20 Financial Results and Conditions . . 21 Resources ....................................... . 23 C. Prospects ........................................ 23 BRD's Strategy ................................... 23 Projects Pipeline . . 24 Financial Forecasts .............................. 24 Resource Requirements ............................ 25 III. THE PROJECT ................................. 26 A. The First Two IDA Credits to BRD .. 26 B. Objectives of the Proposed Third IDA Credit .. 27 C. Description of the Project. 27 Line of Credit to BRD . .27 SSE Study Component . .29 D. Project Costs and Financing . .30 E. Project Implementation . . 31 F. Benefits and Risks . .32 IV. RECOMMENDATIONS AND AGREEMENTS REACHED ............... 33 This document has a ratricted distibution and may be used by recipients only in the performance of their ofilcial duties. Its contents may not otherwie be discloed without World bank authorization.  I  RWANDA BANQUE RWANDAISE DE DEVELOPPEMENT (BRD) Annex No. Page No. 1. RWANDA - Structure of Interest Rates . . 34 2. BRD - Distribution of Share Capital December 31, 1981 35 3. BRD - Borrowings as of December 31, 1981 . .36 4. BRD - Summary Income Statements 1977-1981. 37 5. BRD - Summary Balance Sheets 1977-1981 . .38 6. BRD - Past Financial Ratios ..39 7. BRD - Projected Operations, 1983-1985 . . 40 8. BRD - Projected Income Statements 1983-1985 . . 41 9. BRD - Projected Balance Sheets, 1983-1985 . . 42 10. BRD - Projected Sources and Uses of Funds, 1983-1985 .. 43 11. BRD - Projected Financial Ratios, 1983-1985 . . 44 12. BRD - Schedule of Disbursements . .45 13. BRD - Terms of Reference for the SSE study . .46 This report is based upon the findings of a mission consisting of Messrs. Emile Sawaya, Chuong Phung and William Whitesell (consultant), which visited Rwanda in April 1982.  I  - i - BANQUE RWANDAISE DE DEVELOPPEMENT BASIC DATA Year of Establishment 1967 Ownership : (as of December 31, 1981) Authorized Capital : RwF 1,000 million Distribution of Paid-In Capital RwF million % Government and Other Public Institutions 539.0 61.6 Domestic Private Sector 129.7 14.8 Foreign Institutions (CCCE, DEG, Belgian 206.2 23.6 Government and Bank of Tokyo) Total 874.9 100.0 Resource Position (as of December 31, 1981) RwF million Local Foreign Total Sources Share Capital, Reserves and Special Funds 1,051.5 - 1,051.5 Foreign Borrowings 63.0 1,065.0 1,128.0 Government and Central Bank 126.2 1,000.0 1,126.2 Total Resources 1,240.7 2,065.0 3,305.7 Uses' Net Fixed Assets 101.1 - 101.1 Loan and Equity Portfolio 605.2 769.5 1,374.7 Total Uses 706.3 769.5 1,475.8 Resources Available for Disbursement 534.4 1,295.5 1,829.9 Undisbursed Commitments 6.0 756.7 762.7 Resources Available for Commitment 528.4 538.8 1,067.2 Uncommitted Approvals - 10.0 10.0 Construction of the New Building 435.0 - 435.0 Resources Available for Approvals 93.4 528.8 622.2 Approvals (RwF million) 1978 1979 1980 1981 Agriculture and Livestock 1.3 93.2 - 1.5 Agro-industry 165.2 13.6 211.0 - Manufacturing Industries 195.0 190.8 254.5 8.6 Hotels and Tourism 6.0 - 28.5 5.0 Transport - - 160.0 Commerce - - 160.0 252.0 Other - 4.8 - - Total 367.5 302.4 654.0 427.1  - ii - Operating Results (RwF million) 1978 1979 1980 1981 Gross Income 60.3 88.5 121.5 141.2 Administrative Expenses 24.5 31.3 34.9 50.4 Financial Charges 10.4 16.8 24.4 26.3 Depreciation 5.1 7.1 8.8 8.6 Provisions 5.7 15.6 7.3 9.0 Net: Profit 14.6 17.7 46.1 46.7 Net: Profit/Average Net Worth (%) 4.1 4.0 7.5 5.2 Net Profit/Year End Paid-in Share Capital 4.3 4.2 7.6 5.3 Financial Position (RwF million) Net Worth 387.7 490.9 736.9 1,050.8 Total Assets 794.9 1,171.1 1,327.8 1,746.0 Term Debt/Equity 1.10 1.30 0.73 0.67 Interest Rates. (These rates were agreed with BRD during negotiations and prevail unless a different rate is specified by lender). Medium term loans Long term loans (1 to 4 years) (more than 4 years) Agriculture and Livestock 10% p.a. 11% p.a. Industry and Mining 11% p.a. 12% p.a. Services 12% p.a. 13% p.a. Commissions and Fees: A commission of 0.75% on loan amount plus a commitment fee of 1% per year on undisbursed amounts. Status of IDA II (Credit 896-RW) Credit Account : US$5.2 million, of which US$0.2 million to finance a feasibility study for the establishment of an audit firm in Rwanda. Date of Effectiveness : January 4, 1980. Amount Authorized under Credit Component : US$5.0 million. Amount Committed: (as of January 31, 1983) : US$4.1 million. Amount Disbursed: (as of January 31, 1983) : US$1.1 million. Foreign Exchange Risk : Borne by Government. Closing Date : June 30, 1983. Free Limit : US$200,000.  I. THE ENVIRONMENT A. The I]ndustrial Sector Characteristics and Past Performance 1.01 Industry in Rwanda is the largest sector after agriculture, accounting for 17% of GDP in 1980, but is still small by world or African standards, with value added estimated at US$200 million in 1980. Although the sector includes mining, manufacturing is the dominant activity, with a share of 90% of the sector's value added. The main production is of consumer goods, particularly food and beverages, textiles, shoes and a few household goods. The processing of such agricultural products as coffee and tea is also important and contributes a large proportion of the country's foreign exchange earnings: 56% of total export receipts in 1980. Mining, which in Rwanda is largely for cassiterite and wolfram is dominated by one company, SOMIRWA (Societ