Document of The World Bank FOR OFFICIAL USE ONLY Report No. No. 5791-RW STAFF APPRAISAL REPORT RWANDA A FOURTH IDA CREDIT FOR BANQUE RWANDAISE DE DEVELOPPEMENT November 22, 1985 Industrial Development and Finance Division Eastern and Southern Africa Projects Department This document has a restricted distribution and mam 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 Currency Unit Rwanda Franc (RwF) Exchange Rates January 1974 - August 1983 - US$1.00 = RwF 92.84 Since September 1983 - SDR1.00 = RwF 102.71 (RwF amounts have been converted into US$ at the rate of RwF 105 US$1.00) Fiscal year January 1 - December 31 FOR OMCIAL USE ONLY RWANDA FOURTH BRD PROJECT CREDIT AND PROJECT SUMMARY Borrower: Rwandese Republic. Beneficiary: Banque Rwandaise de Developpement (BRD). Amount: SDR 8.5 million (US$9.0 million equivalent). Terms: Standard IDA terms. Relending terms: The Borrower would onlend the Credit proceeds to BRD on the following terms and conditions: (i) IBRD interest rate in effect at the time of distribution of Credit documents to the EDs, with a flexible amortization schedule that would substantially conform with the aggregate of the amortization schedules of subloans made by BRD and financed under this project (subject to a maximum of 15 years, including a grace period not to exceed 5 years) on the portion of the line of credit allocated for medium-sized projects (US$5.0 mill'on); (ii) 7% p.a. wsith a fixed amortization schedule of 10 years, including 5 years of grace on the remaining US$4.0 million to be used for small-scale enterprises (SSEs). The weighted average cost of IDA funds to BRD would be about 8% p.a. The Government would bear the foreign exchange risk. Objectives and Project The project would continue IDA's support to BRD as an effective financial intermediary -- and the Deseription: main instrument in Rwanda for developing the private sector -- to provide term financing for well-designed development projects. The project would also assist the Government in improving the policy framework for SSEs through the establishment of a special regime for them in the investment code, improving the operation of the Special Guarantee Fund for SSE lending, and would provide a vehicle for reviewing with Government the recommendations of the ongoing tariff study. The project would provide a line of credit of US$9.0 million to BRD, of which US$5.0 million would be used for financing medium-sized enterprises and US$4.0 million would be for SSE projects. 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. - 2 - Benefits and Risks: The project would provide term investment resources to help the development of Rwanda's private sector and particularly SSEs. It would enable IDA to continue to support BRD in its efforts to improve its effectiveness and would play an important role in improving the policy framework for SSEs and initiating a dialogue with Government on the reform of the tariff system. The project would help create about 1,500 jobs at an estimated average cost of US$10,000 per job. The main risk in this project relates to the possible deterioration of BRD's financial position because of an increase in its arrears. This risk is, however, limited (i) because BRD has developed a sound program for assisting SSEs, the first phase of which has yielded encouraging results; and (ii) because of the actions BRD has already initiated to deal with its two major problem projects and the measures proposed in the context of this project to improve its collection performance and which will be closely monitored by IDA. Estimated Cost Local Foreign otal (US$ million) Total Financing Required for BRD operations 9.6 18.9 28.5 Financing Plan Resources Available for Commitments at BRD 2.9 3.4 6.3 Fourth IDA credit - 9.0 9.0 BRD's Cash Generation 6.7 - 6.7 Other Donors - 6.5 6.5 Total 9.6 18.9 28.5 Est-mated Disbursement ( US S million) IDA FY 1987 1988 1989 1990 1991 1992 1993 Annual 0.4 0.9 1.9 2.0 1.6 1.6 0.6 Cumulative 0.4 1.3 3.2 5.2 6.8 8.4 9.0 RWANDA FOURTH IDA CREDIT FOR BANQUE RWANDAISE DE DEVELOPPEMED7 (BRD) Staff Appraisal Report Table of Contents Page No. I . THE ENVIRONMENT ........................................... I A. The Manufacturing Sector ............................ I The setting ....... .............. .................. 1 Structure and performance ....... a..* ........e.. 2 Modern manufacturing o .......................... 3 SSE sector ...................................... 3 Industrial Policies and Issues .................... 4 Import licensing ..... ........................... 5 Import tariffs ...... ................ 5 Price controls .................................. 5 Investment code .. ....... . ............ 6 Special Guarantee Fund ......... 7 B. The Financial Sector .............................. 7 Description .......... 7 Availability of Finance for Industry .............. 8 Interest Rates .............. ................................ 9 Foreign exchange system ................... ........ 10 II. THE INSTITUTION ......................................... 11 A. Relationship with IDA and Performance under previous Bank Group Projects ............. I................ 11 B. Institutional Aspects ..... - ...................... 12 BRD's objectives and roles ....................... 12 Share capital and ownership ...................... 12 Board of directors ............................... 12 Management, staffing and training .... ............ 13 Organization ..................................... 14 -2- Page No. Operating policies and procedures ................ 15 Policy statement ...... ......................... 15 Appraisal ......................... ..... 15 Supervision .................................... 15 Promotion .................. .................... 16 Procurement and disbursement ........... & ........ 16 Auditors ..................................... 0 .......... 16 Terms and conditions of lending ......... ......... 16 Interest rates ........... . . .... . .....* ............ 17 Foreign exchange risk coverage ................... 17 C. BRD and SSEs .................................. .. 18 BRD's SSE strategy ............................ 18 Organization and procedures ................... 19 Preliminary Results of the SSE pilot program .. 20 D. Operations ... ...... . .. ....... 20 E. Portfolioa nd Provisions ..... ................... 22 Loan portfolio ................... ............. 22 S-SE portfolio ... ................. ............. 23 Arrears and Provisions ..... ................. .. 24 Equity portfolio . ........................ ... 24 F. Financial Results and Condition .... ............ 25 Profitability ........ ................... ...... 25 Finaclcial results . . .............. 25 SSE impact on BRD performance ....... .. ...... 26 Financial condition ...... ................ ... 26 Resources ......................... ........... 26 G. Prospects ....................................... 27 BRD's strategy ............................. ... 27 Projected operations ..... .................. ... 27 Projects pipeline ..... ................... ... 27 Forecast operations ..... .................. .. 28 Resource requirements ..... .................... 28 Projected financial condition and results 30 - 3 - EII THI PROJECT.32 ITT. THE PR J..T ........................................... 3 A. Project Objectives and Justification .... .......... 32 B. Description and Conditions of the Project ......... 32 The Proposed Line of Credit to BRD ...... ....... .. 32 Lending conditions ..... ....................... 33 Onlending rates ...... ....................... 33 BRD lending rate ..... ....................... 33 Commitment charge ..... ...................... 33 Free limit ................................... 34 Amortization schedule ......................... 34 Commitment period ..... ........................ 34 Debt/equity ratio . . . ............. 34 C. Total Project Costs .............................. 34 D. Project Implementation ............................ 34 Reporting requirements .......................... 34 Prrocurement and disbursement .................... 35 qc^^cial aCCOUrLt ..... . .... .0.... -6........ *.................. 35 Disbursements and documentation ................. 35 E. Benefits and Risks ................................ 36 IV. AGREEMENTS REACHED AT NEGOTIATIONS .................... 37 This report is based on the findings of an appraisal mission to Rwanda in February/March 1985. The mission was composed of Messrs. Chuong N. Phung Philip C. Adoteye and Christian A. Schmidt, all of EAPID. GLOSSARY ACHOR African Continental Holding of Rwanda BACAR Banque Continentale Africaine au Rwanda BNR Banque Nationale du Rwanda BPI Bureau de Promotion Industrielle BRD Banque Rwandaise de Developpement CCCE Caisse Centrale de Cooperation Economique CER Caisse d'Epargne du Rwanda EDF European Development Fund EIB European Investment Bank IDA International Development Association MINIFINECO Minisrare des Finances et de l'Econonie MINIMART Ministare des Mines, de l'Industrie et de l'Artisanat OCIR-The Office des Cultures Industrielles du Rwanda-The OCIR-Cafe Office des Cultures Industrielles du Rwanda-Cafe SSE Small Scale Enterprises SSI Small Scale Industries BANQUE RWANDAISE DE DEVELOPPEMENT (BRD) BASIC DATA Year of Establishment: 1967 Ownership (as of December 31, 1984): Authorized Capital: RwF 1,120 million Distribution of Paid-In Capital: RwF million Z Government and other Public Institutions 617.0 55.1 Domestic Private Sector 139.6 12.5 Foreign Institutions (CCCE, DEG, FMO, s Belgian Government and Bank of Tokyo) 363.. 32.4 Total 1,120.0 100.0 = Resource Position (as of December 31, 1984): RwF million Local Foreign Total Sources Share Capital, Reserves, and Special Funds 1,486.3 - 1,486.3 Foreign Borrowings 91.1 1,326.0 1,417.1 Government and Central Bank 119.7 505.0 624.7 Total Resources 1,697.1 1,831.0 3,528.1 Uses Net Fixed Assets 438.1 - 438.1 Loan and Equity Portfolio 1,120.9 1,101.2 2,223.1 Total Uses 1,559.0 1,101.2 2,660.2 Resources Available for Disbursements 138.1 729.8 867.9 - ii - Withdrawals in foreign currency for loans disbursed (184.7) 184.7 - Undisbursed Commitments 19.3 184.0 203.3 Resources Available for Commitments 303.5 361.1 664.6 Uncommitted Approvals 266.9 151.0 417.9 Bank Building Construction 25.0 - 25.0 Resources Available for Approvals 11.6 210.1 221.7 Approvals (RwF million) 1980 1981 1982 1983 1984 Agriculture and Livestock - 1.5 9.8 181.7 56.5 Agro-Industry 211.0 - - 15.5 6.1 Manufacturing Industries 254.5 8.6 246.5 143.0 206.0 Hotels and Tourism 28.5 5.0 5.5 81.5 152.5 Transport - 160.0 - - 3.0 Others 160.0 252.0 5.0 56.5 191.8 Total 654.0 427.1 266.8 478.2 615.9 =~ = = - iii - Operating Results (RwF million): 1980 1981 1982 1983 1984 Interest & Commissions on Loans 99.9 117.4 157.8 187.4 223.6 Other Interest Income 0.8 1.3 3.3 2.3 7.6 Dividends 22.8 21.2 21.2 21.0 21.0 Other Income 6.0 4.9 29.1 27.4 22.6 Administrative Expenses 34.9 50.4 59.1 63.4 69.3 Financial Charges 24.4 26.3 34.6 45.4 62.8 Depreciation 8.8 8.6 8.8 8.8 9.6 Provisions 7.3 9.0 34.9 41.4 107.4 Other Charges 1.8 8.7 1.5 8.7 3.6 Net Profit 52.3 41.8 72.5 70.4 22.1 Net Profit/Average Net Worth (%) 9.0 4.9 7.0 5.9 1.6 Net Profit/Year End Paid-in Capital (X) 8.7 4.8 8.1 6.8 2.0 Financial Position (RwF million): 1980 1981 1982 1983 1984 Net Worth 700.3 998.4 1,073.5 1,327.7 1,400.3 Total Assets 1,327.8 1,746.0 2,097.3 2,933.9 2,977.2 Term Debt/Equity 0.73 0.68 0.81 1.03 0.94 Medium-Term Loans Long-Term Loans Interest Rates: Agriculture & Livestock 10% 11% Induscry and Mining 11% 12% Services 12% 13% Commisslons and Fees: Commitment fee: 1% p.a. on undisbursed amounts. Commission: 0.75% of the loan amount. Late fee: 4% Status of IDA III (Cr. 1344-Rw): Credit Amount: SDR 6.5 million of which SDR 2.3 million for SSE financing, SDR 4.1 million for larger projects, and SDR 92,000 to Government to finance a study for the development of an SSE program. Date of Effectiveness: February 14, 1984. Amount Authorized under Credit Components: SDR 6.5 million Amount Committed (as of Sept. 30, 1985): SDR 5.5k! million (85%) Amount Disbursed (as of Sept. 30, 1985): SDR 2.6 million (39%) Foreign Exchange Risk: Borne by Government Closing Date: December 31, 1988 Free Limit: uS5OO,000 I. THE ENVIRONMENT A. The Manufacturing Sector The Setting 1.01 Rwanda is a small landlocked country which depends on Kenya, Uganda and Tanzania for its access to the sea. More than 5.5 million people live in about 26,000 km2 of hilly to mountainous land, making Rwanda the most densely populated country in Africa. GNP per capita, estimated at USS270 in 1983 (Atlas method), is among the lowest in the world. The population, overwhelmingly -.ural (90%), is increasing at a rare of 3.6% per annum and derives its livelihood mainly from subsistence agri,ulture and coffee cultivation. 1.02 Despite the predominantly rural nature of its economy (47% of GDP and 70% of foreign exchange earnings), Rwanda has a relatively active modern sector. Services (excluding public administration) have grown fast over the last six to seven years and now account for 21% of GDP. Mining, although small in terms of its contribution to GDP (about 1%), is an important foreign exchange earner (nearly 20X of total export receipts) and employer (6,000 salaried workers plus 12,000 artisan miners). Rwanda's mined resources include cassiterite (a tin ore), wolgram (a tungsten ore), columbG-tantalice (produced with cassiterite), and some gold. Industry has also emerged as an important sector, contributing about 17% to GDP and employing 40,600 people. The sector is geared toward meeting the domestic demand for basic goods. Manufacturing exports are negligible. Another major sector of the economy is public administration which accounts for 9% of GDP and employs 22% of the total salaried labor force. Construction and public works make up the remaining 5% of GDP. 1.03 Rwanda's recent economic history has been one of considerable progress. Following a period of stagnation due to bad weather conditions in 1970-74, GDP grew at a rapid rate of 5.4% p.a. in real terms between 1974 and 1980, spurred by high mineral and coffee prices. The income gains for the population were impressive as evidenced by the tripling of the GNP per capita (from US$74 in 1974 to USS220 in 1980) which, in Rwanda, is fairly evenly distributed. Inflation, which averaged 14% during 1977-79, abated with the return to normal supply conditions following the reopening of the Uganda border in 1980. 1.04 From 1981 to 1983, GDP continued to grow, albeit at a lower rate than in the past (4.0% p.a. :.n real terms). Mining production stagnated due to the financial and managerial problems of SOMIRWA (Societe Minie're du Rwanda), hut agriculture expanded at a real rate of 4.5%. The highest growth was posted by the construction sector (10% p.a.), followed by public administration (9%) and manufacturing (7%). - 2 - 1.05 Tn contrast to previous years, the 1981-83 growth was accompanied by a weakening of the budget and the balance of payments, reflecting unfavorable exte.rsql conditions and some relaxation of the Government policy of expenditu-e restraint. The budgetary deficits in 1981-83 depleted the Treasu-y's cash balances (US$32 million in deposits with the banking system in 1'80), and turned the Government's position vis-a-vis the banking system into a debtor position. The emphasis given to control of public expenditure in the austerity program announced in January 1984 and the efforts made since then to reduce the budgetary deficit show that the Government has understood the gravity of the problem. To reduce the appreciation of its currency, the Government also delinked the Rwanda Franc from the US dollar and tied it to the SDR at the rate of SDR 1 = RwF 102.7 in September 1983. 1.06 In 1984, the balance of payments recovered and registered a surplus as a result of high prices and exports of coffee and tea and some restraints on imports. Gross foreign exchange reserves increased to US$139 millioni (equivalent to about 5 months of imports of goods and non-factor services) at the end of 1984, while the debt service burden was negligible (less than 3% of exports of goods and non-factor services). Inflation remained noderate (about 6%) and the relatively good performance of the agricultural sector suggests that GDP in real terms increased by about 3.5% to 4.0% in 1984. Prospects for 1985 are favorable as the coffee harvest looks promising, and the investment climate is good. Structure and Performance 1.07 During the period 1977-83, manufacturing expanded at an average rate of 8.7% p.a. in real terms, aided by a growing economy and a stable environment, and reached 17% of GDP in 1983, a high share by sub-Sahara African standards. Most of the growth was registered by modern enterprises and was due in part to the start of production of new enterprises, such as cigarettes and matches, plastic tubes, galvanized iron sheets, etc. By contrast, the growth of the SSE/artisan sector has been modest (about 3%-4% p.a. in real terms), with the exception of the non-metallic minerals branch (bricks, tile, etc.), which recorded an average rate of 12% p.a., mainly as a result of a high demand for bricks and other local materials due to the construction of few large buildings. 1.08 This high growth yielded little structural change. The sector remained mostly composed of artisans and small enterprises producing basic goods for the domestic market. There are a total of only 80-100 medium and large enterprises with more than 30 employees, including some 20 public and mixed enterprises. According to surveys conducted by the Ministry of Mining, Industrv and Artisanat (MINIMART), about 26,000 people work as artisan or in small industry, 1/ as compared to 14,000 employed in medium and large enterprises. The SSE sector also generates about 60% of the industrial value added. 1/ Small scale industry is defined as an enterprise having net total assets of less than RwF 30 million and employing less than 30 employees. 1.09 Modern manufacturing is mainly concentrated in Kigali, the capital where infrastructure is more developed, although some secondary towns are becoming more active and important. With the exception of food processing, modern manufacturing relies mainly on imported inputs. Production is typical of the first generation of import substitution, with official exports limited to processed coffee, tea, pyrethrum and a few other products. Most firms enjoy a relatively high level of tariff protection (50% to 80% for most competing imports) and some have access to the benefits granted by the investment code. Those managed by private owners are generally profitable, but rely to a large extent on expatriate personnel. With some exceptions, they operate at relatively high capacity, but the quality of their products is often low by international standards. 1.10 Perhaps the greatest change since 1977 occurred in ownership patterns of modern industry. The Covernment did not limit its ro]e to improving the institutional framework as it had declared but also financed a number of industrial ventures. Out of the 22 industrial projects completed during 1977-82, 13 were fully or majority-state owned. At present, about a third of the capital in modern manufacturing belongs to the public sector. The Goverament's increased intervention in manufacturing resulted from the desire to step up economic growth by increased investment in industry, the necessity to be present in companies of national interest, and, last but not least, the availability of bilateral aid to finance state-owned projects. However, most of these interventions were poorly planned and implemented. Many became part of the administration when completed as no structure was created to operate them. They do not have an independent management and function as public services. All important decisions are taken at the ministry level, accounting is neglected and cost control practically non existent. Most public industrial enterprises are in deficit and work at very low capacity. In view of these disappointing results, the Government recently decided to reduce its direct involvement in industry. It is reviewing the public investment program and is trying to reorganize and improve the operation of public industrial enterprises with a view to finding private investors to share in the ownership or acquire in full some of them. 1.11 Rwanda's SSE sector is diverse and dynamic and has, compared to other African countries, developed without much institutional assistance. Small industries are mainly in brick and tile making, grain milling, bakeries, garment-making, wood and metal products. At the artisan level, production includes banana wine, baskets, bricks, wood furniture, butchering, masonry and blacksmithing. Manufacturing represents only about 25% of SSE activity in Rwanda, with agriculture, commerce and other services remaining the dominant activities. Virtually all SSEs are owned by Rwandese nationals and are either family businesses or cooperatives. Exceptionally few SSEs are limited liability companies. Unlike modern manufacturing, which is mainly concentrated in Kigali, SSEs are spread countrywide. About 70% are almost equally divided between the four major urban areas (Kigali, Gitarama, Butare and Gisenyi), and the remaining 30% are found in the other, more rural areas. They are productive, labor intensive and less dependent on imported inputs than many modern enterprises. - 4 - 1.12 To improve Rwanda's knowledge of this sector, its constraints and potential, IDA financed a comprehensive study on SSEs in Rwanda under the Third Credit to BRD. The work was carried out by BRD and the Centre Africain de Statistiques et d'Economie Appliquee, and covers 220 enterprises, 146 of them located in rural areas and 74 in Kigali, and in the other three major cities of Rwanda. The study, which was submitted to the Government for consideration in December 1984, revealed that the development potential for SSEs in Rwanda is significant. SSEs are less constrained by the small size of the local market and there is ample scope for development in such diverse areas as food processing, agricultural tools, livestock, construction materials, etc. However, the sector also faces severe constraints. More than modern enterprises, SSEs suffer from the lack of incentives, limited availability of training facilities and difficult access to bank credit, although they appear to have substantial borrowing capacity as their debt/equity ratio is generally low. These issues will be addressed in the proposed project (paras. 1.20 to 1.24). Industrial Policies and Issues 1.13 In Rwanda, the responsibility for the formulation and implementation of industrial policies is shared between four institutions. The Ministry of Mining, Industry and Artisanat (MINIMART) has the responsibility for overall industrial policy formulation but mainly concentrates its efforts on industrial promotion, including SSEs, and on delivering industrial licences. It also plays a role in the granting of benefits under the investment code and has under its control the Bureau for Industrial Promotion (BPI), created in 1977 to prepare industrial projects and assist enterprises in difficulty. The Central Bank (Banque Nationale du Rwanda - BNR) controls import licensing and all foreign exchange transactions, sets interest rates charged by most financial institutions, and manages the country's exchange rate. The Ministry of Finances and Economy (MINIFINEC0) influences industrial development through taxes and import tariffs and approves the benefits proposed by MINIMART under the invTestment code. Finally, the Planning Ministry (MINIPLAN) coordinates the preparation and follows the execution of the country's industrial investment program. Other institutions also affect industry, such as the Ministry of Social Affairs, which fixes minimum wages and salaries for different levels of skill. 1.14 To regulate and assist the industrial sector, the Government relies essentially on the same policy instruments used by most other African countries, but applies them with a certain liberalism, allowing some competition from imports and often amongst local producers. Recent measures taken to protect the country's foreign exchange reserves have, however, increased the level of protection accorded to local industry. 1.15 Import licencing. All imports are subject to licencing, but licences are usually granted. Restricting imports of competing goods to protect local producers has not been Government policy, though, in 2 few cases, imports have been temporarily banned. However, in an effort to reduce the level of imports in the face of balance of payments difficulties, the Government introduced in March 1983 a scheme requiring importers of certain goods to place a 100% local currency deposit with the central bank at the time the import license is issued. The deposit earns interest but since imports take four to six months to arrive, this measure imposes a considerable strain on the liquidity of importers. Goods covered by the regulation include those carrying high import duties as well as most goods produced locally. Industrial inputs are not affected. Applications for import licences have fallen since the scheme, which is operated by the BNR, was introduced. 1.16 Import tariffs. Imports are subject to a customs duty varying from 5% to 20%, a fiscal duty of up to 130% of the cif value, and a bonded storage tax of 3% cif value. A preferential rate of 1% is applied to items exempted from import duties. The tariff structure shows a familiar pattern: exemptions or low duties on raw materials, intermediate and capital goods, as well as consumer goods not produced locally; and high rates on consumer goods not produced locally and luxuries. Generally, duties increase with the stage of processing. 1.17 The large differences in duty rates result in widely different rates of protection to various manufacturing activities. The fact that industrial inputs attract low duties (or are exempted) provides little incentives to develop local substitutes and may discourage industries that could be viable in Rwanda. On the other hand, high duties on consumer goods encourage local production that is economically inefficient. The Government is aware of the need to reform the tariff system and has initiated a comprehensive study of the tariff structure with a view to encouraging efficient import substitution and exports. During appraisal of this project, IDA staff advised the main officials responsible for the tariff review on the approach to be used and prepared for them a note outlining the objectives and methodology of a tariff study in Rwanda. The study is expected to be completed by early 1986. Given its importance for the industrial sector, it was agreed at negotiations that Government would review the study's recommendations as well as the proposed timetable for introducing changes with IDA by July 1, 1986 (para. 4.02(a)(i)). 1.18 P:ice controls. Since March 1983 a form of ex-ante price control (Homologation des Prix) has been in force in Rwanda. According to the Ministerial Decree, prices of imported goods and those manufactured locally should be approved before goods are sold. Manufacturers can claim a net margin of 15%, while traders are allowed a gross margin of 15% (wholesale), or 25% (retail). - 6 - 1.19 The price control system, however, is not applied strictly. Although importers are required to submit price information to the Commerce Department, their proposed prices are approved automatically within 24 hours. With regard to local manufacturers, only two enterprises having a special agreement with the Government have had their prices reviewed by the administration. Twenty others (all large enterprises) have submitted the information requested, but are in fact free to sell their products at prices deemed reasonable. SSEs are not affected at all as the Commerce Department does not even request them to provide price information and does not intend to do so in the future. As applied now by the Finance Ministry, the system is directed at obtaining information necessary to analyze developments in the economy rather than at controlling prices. It operates as a price registration system and does not appear to be a constraint for importers and manufacturers. 1.20 Investment Code. The code offers eligible foreign and local investors the following guarantees and fiscal advantages: (i) repatriation of interests, dividends, and the original capital invested at the official exchange rate; (ii) exemption from payment of import duties on imported inputs and equipment; (iii) tax holiday for five years, and reduced taxes for the subsequent two years; and (iv) a wide range of benefits in the case of projects that are of special importance to the country and involve large investments. These benefits include, inter alia, relief from various duties and taxes for a period up to 15 years, restrictions on competing imports, and guarantee of Government orders. The administration of the Code is divided between MINIMART and MINIFINECO. Finance has a decisive voice in the granting of the benefits. 1.21 To qualify for the advantages, a project should have a minimum investment of RwF 10 million (US$95,250) for local investors and RwF 20 million (USS190,500) for foreign investors. Twenty eight enterprises (all of them large enterprises) have benefitted from the advantages of the code. The SSE study shows that only 15% of the surveyed SSE companies fulfill the minimum investment requirement and that 94% had never heard about the code. Recently, the Government created an interministerial committee to work on a special regime for small and medium enterprises (SMEs) within the existing code. At negotiations, the Rwandese delegation informed IDA that the preparatory work was fairly advanced and that the final draft would be submitted to the Council of Ministers for approval by June 1986. The SME regime would emphasize the tax exemption aspect of the benefit package as small and medium entrepreneurs are less interested in the other advantages: thev do not repatriate profits and generally do not import directly to benefit from the duty exemptions on equipment and imported inputs. Tax exemptions are also important to induce SMEs to contract bank loans and expand their business. Under present regulations, a borrower should produce evidence that he has paid all due taxes. Many SSEs do not borrow because they prefer to remain unknown to the tax authorities. The SME regime would also have clear eligibility criteria such as the size of the enterprise (net total assets of less than RwF 75 million) and the use of local raw materials (more than 60% of total raw materials). - 7 - 1.22 Special Guarantee Fund. The major action taken by the Government in favor of SSEs was the creation of the Special Guarantee Fund to help enterprises unable to meet normal security requirements to obtain loans from financial institutions. Contributions to the Fund come from a 10% levy on the pre-tax profits of participating institutions, which comprise BRD and the commercial banks. To obtain a guarantee, a request must be submitted, accompanied by a substantial amount of documentation, to an interministerial committee composed of 15 members and chaired by a Director General of the MINIFINECO. Because of its aemanding and cumbersome procedures, the Fund is not functioning well. Over the last six years, only a handful of guarantees were issued and the more than RwF 160 million (US$ 1.5 million) contributed to the Fund have remained largely idle in a central bank account. 1.23 Although some measures have been taken to improve the operation of the Fund such as reducing the number of committee members to seven, it is still necessary to make access to the Fund guarantee more automatic if it is to encourage commercial banks' lending to SSEs. 1.24 At negotiations of this project, the Government outlined the changes it intended to introduce in the Policy Statement and procedures of the Special Guarantee Fund: (i) establishment of clear eligibility criteria. Access to the Fund would be reserved to promoters of productive projects (agriculture, fisheries, induistry and mining) with insufficient security; (ii) simplification of the documentation requested from applicants which would be limited to a description of the borrower, the purpose of the loan and the security offered; and (iii) automatic payments by the Fund when a loan is more than one year in arrears. However, these payments would be limited to 80% of the principal arrears to keep participating institutions interested in pursuing recovery of arrears. These proposed changes are adequate and are expected to improve the functioning of the Special Guarantee Fund. B. The Financial Sector Description 1.25 Rwanda's financial system is simple and consists of the following institutions: the Central Bank (BNR), three commercial banks (Banque Commerciale du Rwanda, Banque de Kigali, and Banque Continentale Africaine - Rwanda - BACAR), a network of cooperative banks (Banques Populaires), a Savings Association (Caisse d'Epargne du Rwanda), a mortgage bank (Caisse Hypothecaire) and a development bank (Banque Rwandaise de Developpement - BRD). BRD is described in detail in the following chapter. All these institutions have headquarters in Kigali, but some of them have branches in the interior of the country. With the exception of the commercial banks, all the other institutions are totally, or to a significant extent, Government-owned. Under the sponsorship of BACAR, a new private financial - 8 - institution (African Continental Holding of Rwanda - ACHOR) is being created to take equity in existing companies and to establish new companies. The majority of ACHOR's share capital would be held by the Banque Continentale du Luxembourg and the rest by private Rwandese Businessmen. ACHOR is not yet in operation. 1.26 Financial institutions are supervised by BNR which requires them to submit regular financial statements and monthly information regarding their activities, and sets strict criteria for their lending operations 2/, the most important of which are as follows: Institutions taking deposits from the public should, at all times, maintain their equity to at least 10% of their liabilities. Equity participations by banks cannot, unless approved by BNR, exceed 10% of the bank's net worth and 20% of the company's share capital. Finally, the financial institutions' exposure limit to any single enterprise is fixed by BNR at 25% of their net worth. No financial institution may exceed this limit without BNR's express authorization. 1.27 Another characteristic of Rwanda's financial system is its high degree of specialization. Because of the short-term nature of their resources, commercial banks may not, unless authorized by BNR, engage in long-term lending (more than four years) which Ls the domain of institutions such as BRD and the Caisse Hypothecaire. They are mainly active in import and export financing and overdrafts to local companies. At the end of 1984, about 88% of all short-term credits were extended by the three commercial banks. 1.28 BRD is the most important long-term lender, accounting for 72% of the RwF 2,712 million (US$25.8 million) long-term credit outstanding at the end of December 1984. The rest is mostly held by commercial banks which are allowed by BNR to provide long-term housing finance, given the still relative inactivity of Caisse Hypothecaire in this field. On the other hand, BRD and Caisse Hypothecaire are not, in principle, allowed to grant short-term credits. Commercial banks' medium-term lending (one to four years) is limited to a maximum determined by their net worth plus deposits of more than a year duration minus fixed assets, equity participations, doubtful debts and losses. Among commercial banks, Banque Commerciale du Rwanda is the most active in medium-term lending, holding about 30% of total medium-term credit outstanding at the end of December 1984. Availability of Finance for Industry 1.29 Credit to the economy is controlled by BNR which sets global ceilings on short-term credits for the whole banking sysEem, and for each of the three commercial banks. BRD is not subject to credit control as its resources (mainly foreign exchange) come from abroad. The credit ceilings for the commercial banks are set on a quarterly basis and the allocations per bank depend on their deposits and BNR's growth projections of the economy. 2/ BRD's lending policy is not subject to BNR regulation, but is set by its Board. - 9 - 1.30 BNR's control over credit extended by the banking system is tight but does not appear to have been a constraint for manufacturing development. Ceilings assigned to commercial banks have not prevented them from meeting manufacturing firms' short-term credit needs. Term credit is more limited and mainly provided by BRD through lines of credit from foreign donors. IDA is the main lender to BRD and the proposed credit would help it continue supporting the growth of the industrial sector. 1.31 SSEs have more difficulty than large enterprises finding financing for their projects. According to the SSE study, less than 25% of the surveyed enterprises have obtained a bank loan, although about half of them have at one time or another applied for credit. Credit to SSEs is not well organized or developed. Short-term credit, mainly to small enterprises in commerce, transport and construction, is provided to a limited extent by the commercial banks, and by the Banques Populaires, a decentralized cooperative banking system akin to credit unions and created in 1975 with Swiss aid. It is only since 1982 that BRD, the major term lender in Rwanda, is giving high priority to SSE lending and has developed a program to assist their development. The Banques Populaires are also active in term lending, but most of their loans have been to individuals for housing improvements and car purchases. Expansion of credit for directly productive activities is hindered by the Banques Populaires' lack of appraisal capability and the high administrative costs of processing and supervising a large number of small loans. The commercial banks are reluctant to enrage in term lending to SSEs because of the high risks involved. However, with the improvements in the operation of the Special Guarantee Fund sought under this IDA credit (paras. 1.22 and 1.24), it is expected that the Commercial banks will be more active in SSE lending. The proposed project, by allocating US$4.0 million to SSE projects, would also substantially improve the availability of term credit for SSEs. Interest rates 1.32 With the exception of those charged by BRD, interest rates are regulated by BNR, which put into effect a substantial upward revision in November 1979 (Annex 2). Since then, interest rates have remained unchanged, except for minor modifications such as the introduction in 1980 of penalty interest on defaulters. Tuie maximum rates for term deposits of one month to one year vary from 7.5% to 8.75% and range from 8.75% to 11.87% for savings bonds of one to five years maturity. These rates include a tax equivalent to 20% of the rate to be paid by the banks to the Treasury. On the lending side, short-term credits for general imports and overdrafts, which represent the bulk of commercial banks' lending, carry rates of 14% and 14.5%, respectively. Other lending rates are 4% for tea exports, 5% for mining exports and 9% for coffee collection and imports of essential goods. The lending rate for productive investments approved by BNR is 11%. Other term loans carry rates between 12% and 14%. In view of the present and projected inflation (about 6% to 6.5%), the present interest rate structure is considered generally suitable for Rwanda. All the rates are positive in real terms, except for those on short-term credits for tea and mining exports. - 10 - Foreign Exchange System 1.33 Despite the establishment of the import deposit scheme (para. 1.15) which is aimed at protecting the country's foreign exchange reserves, Rwanda remains a relatively open economy compared to other African countries. The foreign exchange system is virtually rree of restrictions on current international transactions. Repatriation of distributed dividends is allowed and resident expatriates can repatriate up to 60% of their net annual income. Since 1981, restrictions on transfers of net rental income by non-residents and resident expatriates were lifted. Manufacturers can obtain foreign exchange at the central bank for payments of imports of equipment, inputs and spare parts. Finally, with the approval of BNR, foreign investors can repatriate the capital invested after sale or liquidation of the comparny. - 11 - II. THE INSTITUTION A. Relationship with IDA and Performance under Previous Bank Group Projects 2.01 The Banque Rwandaise de Dgveloppement (BRD) was established in 1967 as a limited liability company to encourage the creation and development of enterprises in Rwanda, to promote the diversification of the country's economic structure, and to help attract foreign investment into the country. So far, BRD has received 3 credits from IDA: US$4.0 million (Credit 655-RW) in FY76, US$5.2 million (Credit 896-RW) in FY79, and SDR 6.5 million (Credit 1344-RW) in FY83. IDA's main objectives with these credits have been to help BRD develop into a strong development institution and to provide term financing for sound productive investments. Under the third credit, IDA also helped start an effort to assist SSEs by providing funds to implement BRD's SSE pilot program and by financing a comprehensive study of that sector. As of September 30, 1985, about SDR 5.5 million (85% of the total) had been committed under the third IDA credit, and about SDR 2.6 million (39%) had been disbursed. The third IDA credit is expected to be fully committed by early 1986. 2.02 After the first credit had been fully disbursed, a Project Completion Report was prepared in 1983 which concluded that the major objective of strengthening BRD as Rwanda's major term lending institution had been substantially met, but that there was scope for improved performance, particularly in the area of economic analysis of projects. The PCR also noted that IDA funds only financed six large projects, which was due to the fact that IDA was the only lender providing BRD with untied resources. OED did not carry out an audit of the first BRD project. Under the second and third IDA credits, BRD was requested to calculate economic rates of return for all non-services sector projects above the free limit of US$200,000. Funds under these two credits were also spread over a larger number of projects. As of September 30, 1985, IDA funds under the three credits financed 74 projects distributed over several economic sectors, with about 30% in industry, 40% in agriculture and the remaining 30% in services, including hotels and restaurants. The projects were all judged to be viable with economic and financial rates of return in most cases above 15%. Individual project size varied from US$10,000 to US$250,000 for SSE operations with an average cost per job of about US$7,000 and up to US$4 million for larger enterprises with an average cost per job of US$26,000. Annexes 19 and 20 give the characteristics and performance of a sample for projects financed with IDA funds. - 12 - B. Institutional Aspects BRD's Objectives and Role 2.03 BRD's main objectives are to maintain its position as the major source of term lending in Rwanda and, by working within the Government's framework of economic policies, to finance the development of Rwandese enterprises. To fulfill these objectives, BRD is authorized to grant term loans or guarantees and take equity participation in enterprises. It can further receive deposits from enterprises it assists, administer funds, issue notes, and borrow in Rwanda or abroad. The institution is autonomous. Decisions are made on the basis of BRD's own appraisal results deriving from financial, economic and technical merits of projects. Share Capital and Ownership 2.04 BRD's share capital consists of "A" stares which must account for at least 55% of total share capital and are reserved for the Government and public Rwandese agencies and institutions, and B- shares for private and foreign shareholders (Annex 4). There are no differences between the rights and privileges of either category of shareholders. Since the commencement of operation in 1967, five share capital increases have taken place. They demonstrate BRD's ability to convince its shareholders to put up fresh resources to strengthen the institution's capital base. The last increase took place in June 1983, when the Board approved to raise the authorized capital from RwF 1.0 billion to RwF 1.12 billion (US$10.7 million). RwF 96.0 million of the increase consisted of the subscription of a new shareholder, the Dutch Development Finance Corporation (Financierings Maatschappij Voor Ontwikkelinglanden - FMO), which now holds 8.6% of the total share capital. The remaining increase was provided by the Government to maintain the 55% minimum and by the DEG. Ownership of BRD's share capital is presently distributed as follows: public sector 55.1%, domestic private sector 12.5%, and foreign institutions 32.4%. Board of Directors 2.05 BRD's Board of Directors consists of 13 members, seven of whom represent the A shareholders (public sector), and six the B" shareholders (Rwandese private sector and foreign institutions). The President of the Republic appoints the Board Chairman. The current chairman, a high level official of the Ministry of Finance, was appointed in July 1982. The seven A" Directors represent the Government, OCIR-THE, OCIR-CAFE and the Caisse Sociale du Rwanda. The six B" Directors represent CCCE, DEG, FMO, the Belgian Government, SONARWA (the Rwandese Insurance Company) and the two commercial banks. As with the shareholders, there are no differences between the authority and responsibility of either category of directors. The Board meets on a regular basis to determine BRD's policy and to approve equity participations, guarantees and loans - 13 - exceeding RwF 3 million. Overall, the Board's performance is satisfactory. It operates in a business-like manner and has helped develop BRD into a sound institution. Management, Staffing and Training 2.06 In July 1982, the Government appointed a new Managing Director for BRD, after the predecessor's third three-year term expired. The current executive, who is experienced and competent, served previously as Chairman of the Board of one of Rwanda's three commercial banks. He had also been advisor to the President on Economic and Social Affairs. In the day-to-day management of BRD, he is assisted by two competent Rwandese directors, one in charge of Finance and Administration and the other responsible for Investments. There are also two expatriate technical assistants: a Belgian management specialist recruited in 1984, who works in BRD's project supervision division and advises clients on management mattera; and a German development banker (financed by German bilateral aid) who has worked in various capacities at BRD since 1975. He has contributed substantially to the on-the-job training of BRD's local staff and has been instrumental in helping make BRD the strong financial institution it now is. However, his contract will expire at the end of 1985. As BRD moves into SSEs, it intends to rely on his wide experience and has recently made him advisor to the Managing Director. The Rwandese Government has agreed to request the Federal Republic of Germany to extend this expert's contract for another year. 2.07 BRD's staff totals 90. Thirty-nine (including the chief executive) are professionals, all of whom have formal training in banking, agriculture, accounting, economics, finance, business administration, or social sciences. BRD's staff has almost doubled within the last 3 years in line with the expansion of operations. About 12 new recruitments (of whom 4 professionals) are planned during 1985-86, mainly to reinforce the SSE and Supervision Divisions. The staff situation is stable without notable turnover. Salaries are adequate and help retain the generally hard working and dedicated staff. 2.08 BRD's training program relies mainly upon practical on-the-job training by the advisor to the Managing Director and other BRD senior staff, although a number of junior professional staff have also benefitted from specialized courses in project evaluation and financial management organized by the Centre d'Etudes Financieres Economiques et Bancaires (CEFEB) in France, or other organizations. Such training has yielded good results. However, with the increasing complexity of its operazions, BRD would like to expose its staff more to external training to keep them abreast of developments in their field of expertise, and is proposing to improve its staff development program. Under this expanded training program, three staff per year are eApected to participate in seminars and development finance related courses of up to 3 months each for the rtxt two to three years. The courses envisaged relate to small enterprises - 14 - development, appraisal of agro-industrial projects, economic analysis of projects, financial aspects of rural industry and management of development finance institutions. The proposed training program, which BRD will finance from its internal cash generation, is adequate for the level of BRD's needs. Organization 2.09 BRD is organized in two major departments (Annex 5): (i) the Investment Department is responsible for project appraisal (incl. SSEs) in all aspects, as well as for supervision and provision of technical assistance to enterprises assisted by BRD. it is staffed with 20 professionals. A separate SSE division within the Investment Department has been created in 1982 and consists of two units, one for agricultural projects and one for other small projects; (ii) the Administration and Finance Department is responsible for disbursement, loan collection, and relations with foreign donors. It also maintains BRD's accounts and administers the local and foreign resources. It Is staffed with 14 professionals and headed by a department director. 2.10 In addition to the existing departments, a third department - the Studies and Development Department - is currently being organized at BRD. This department will (i) focus on BRD's new area of activity (agriculture) and conduct sector studies as a basis for new operations; (ii) undertake macroeconomic studies; and (i} i) help appraise the development impact of BRD financed projects, paying particular attention to their economic merits. The new department is now staffed with two professionals. The appointed department director, an agronomist by training with some economic background, is undergoing a nine month training program in economics and agricultural project lending in Europe. 2.11 BRD is considering a phased establishment of small regional offices to provide assistance to its clients in the interior of the country, an area which it now gives a high priority. Although its project supervision has so far been satisfactory (para. 2.14), BRD's increased activity and exposure in the regions have resulted in a wide geographical dispersion of its client base (para. 2.32), a factor that has made it difficult to provide adequate assistance from Kigali. BRD therefore intends to set up two small "bureaux regionaux' staffed with one professional each in Gikongoro and Cyangugu 3/ this year to provide on-site assistance to clients. The "bureaux regionaux" will also identify and preappraise future projects. They will report to the head of the Investment Department. The cost of this regionalization program is estimated at RwF 500,000 (US$4,800) per office and per year. BRD's ultimate preference would be to have a field office in each province, but 3/ Gikongoro and C3angugu provinces are considered to have the least access to BRD support services because of difficult access. - 15 - it realises that the financial risks involved call for caution. BRD wiil therefore use the experience of these two offices to decide on a future course of action. BRD estimates that the bureaux regionaux" will start yielding profits from 1988. BRD's approach to regionalization is pragmatic, its caution reasonable, and its organization structure adequate for its purposes. Operating Policies and Procedures 2.12 Policy Statement. BRD's policies are decided by its board and documented in a formal policy statement which was amended in May 1985 to reflect (i) the reorientation of lending towards SSEs and agriculture; (ii) greater emphasis given to the economic impact of projects; and (iii) the decision not to assume the exchange risk on foreign loans. The amendments also clarified BRD's procurement and dividend policies. With these changes, the policy statement is fully satisfactory. 2.13 Appraisal. Appraisal reports are prepared by the staff and reviewed and discussed within the Investment Department at an Appraisal Team meeting (Reunion des Evaluateurs). In a second step, they are presented to the Projects Committee (Comite des Projets), which is composed of all BRD's senior staff and chaired by the Managing Director before they are finally recommended to the Board for approval. The financial and technical aspects of appraisal are handled in a satisfactory manner. Although BRD has progressed in strengthening the economic standard of its appraisal work, there is still room for improvement. During the period of the proposed project, BRD plans to improve its staff in economic analysis of projects (para. 2.08), and project supervision by IDA, including subproject reviews, will pay special attention to this issue. 2.14 Supervision. BRD's supervision procedures are satisfactory. The supervision function was strengthened and centralized during the late 1970s under the first IDA credit. BRD's staff visits projects under supervision twice a year. Those under construction are systematically visited after the first disbursement. Projects encountering difficulties receive additional visits. Following each visit, a letter summarizing the findings is sent to the promotor in which actions to be taken, if any, are pointed out. BRD requires client companies to submit annual reports, quarterly reports and financial statements and reviews them thoroughly. At present, the supervision unit has five professionale working full time on project follow up, but in view of the expanding portfolio and greater involvement in SSE lending, BRD plans to reinforce this unit with two additional staff in 1985/86. - 16 - 2.15 Promotion. BRD's promotional efforts have been effective over the last 5 years. As the institution grew, this function became centralized into a special division - the Project Identification division. Staff of this division have over the years examined the economic characteristics of each region, identified project promoters, and developed a data base of potentially viable projects for possible BRD financing. BRD's decisions to increase SSE and agricultural lending as well as to promote more projects from the regions outside Kigali were direct results of this division's work. The proposed field offices will, in addition to their assistance work, also undertake some project promotion in liaison with the Identification division. 2.16 Procurement and Disbursement. Procedures for procurement and disbursement are adequate. Although the primary responsibility for selecting suppliers lies with project sponsors BRD requests clients to submit at least 3 quotations and ensures that the items to be purchased are suitable for the planned operation. In cases where substantial construction is involved, BRD usually requires competitive bidding. BRD also insists that equity funds are paid first. Disbursements are made against presentation of invoices or relevant documentation, with direct payments being made to equipment suppliers whenever feasible. Payouts are checked by follow-up site visits at the various project stages. As mentioned in para. 2.12, BRD has formally documented its procurement procedures in its revised Policy Statement. 2.17 Auditors. In 1976, it was agreed under the first IDA credit that an independent auditing firm would verify BRD's accounts. Since then, and because of a shortage of audit firms in Rwanda, the Nairobi based firm of Pannell, Kerr, Foster and Co., which has French speaking staff, has been auditing BRD's accounts. The audits have been unqualified and in line with IDA's requirements. Under the proposed credit, BRD will continue to have its accounts and financial statements audited by Pannell, Ke-r, Foster and Co. or by other independent auditors acceptable to IDA. BRD will also continue to furnish to IDA certified copies of its audited financial statements and its annual report within six months after the end of each fiscal year. Terms and Conditions of Lending 2.18 BRD's loans have maturities typically ranging from four to fifteen years, depending on the type of projects being financed. The average loan maturity is about 7.5 years, including a grace period of 1.3 years. Normally, BRD does not finance more than 50% of the total cost of the project. This limit has recently been extended to 80% for SSE projects. BRD takes adequate security and does not accept subordination to any other lender. - 17 - Interest Rates 2.19 BRD's interest rates are not regulated by the rentral bank but set by its board, in which the Government has a majority vote. Over the time of its association with BRD, IDA's efforts concerning interest rates have been to (i) simplify BRD's rate structure which was characterized by differentiations by sector, term and project profitability; and (ii) set rates at a positive level in real terms so as to improve resource allocation and maintain BRD's profitability. IDA's dialogue with BRD and the Government on this issue has been fruitful. Under the first three IDA credits, BRD's interest rates were raised from 7%-9% to 10%-13%. BRD also accepted (i) to eliminate the financial rate of return as a criterion for determining interest rates, (ii) not to give any interest rate preferential to SSEs; and (iii) to maintain all interest rates at positive terms in real terms. BRD's present interest rate structure appears in the Basic Data and consists of six rates ranging from 10% (medium term loans for agriculture and livestock) to 13% (long-term loans for service projects). At negotia- tions of this project, BRD agreed to further simplify its interest rates by adopting two rates: one for the productive sectors and one for services projects. As the average cost of funds under this IDA credit, as well as some of BRD's other important prospective borrowing, would be about 8% p.a. (para. 2.53), BRD further agreed to set these rates at 12J% (productive sectors) and 13J% (services), levels necessary for BRD to remain profitable and highly positive in real terms as inflation is projected to be about 6-6.5% in the next few years. These rates are also competitive with Rwanda's market rates. Foreign Exchange Risk Coverage 2.20 Under the first three IDA credits, the Government assumed the foreign exchange risk (without a fee) because it recognized that BRD, like other DFCs which rely mainly on foreign borrowing, cannot bear this risk. Under the proposed project, it is also recommended that the Government assume the foreign exchange risk as it is difficult for BRD to pass on this risk to its smaller clients - and 45% of this operation will go to SSEs -- because they are inexperienced in foreign exchange dealings. At negotia- tions the Government insisted on assuming the foreign exchange risk without a fee as it has done in the past, and to minimize subsidies it was agreed that the average onlendirg rate from the Government to BRD would be increased to 8% (from the current average of about 7%). For all of its loans under this project, except loans to SSEs, funds would be passed on to BRD at IBRD interest rate, while those to be used for SSEs would carry an onle;nding rate of 7%. - 18 - C. BRD and SSEs BRD's SSE Strategy 2.21 Until 1982, BRD did not put any particular emphasis on SSEs in its lending strategy and required them to provide the same information asked from larger enterprises. Since many SSEs could not comply, their applications were not processed. According to a review of its own experience with SSE financing conducted in 1981, during the six year period ending in 1981, BRD received an average of 63 SSE loan applications per year amounting to about RwF 140 million/year (US$1.3 million/year), but only financed 15% of them because of staff constraints and a higher priority given to the processing of large loans. 2.22 BRD's past reluctance to finance SSEs was due to the higher administrative costs and bad debt losses associated with such lending in earlier years. The 1981 SSE review showed that, at March 31, 1982, most of the arrears over three months was due to small enterprise clients. However, BRD analysis also concluded that several factors could alleviate the negative financial impact of SSE lending. First, more experience in the sector was expected to lead to improved repayment performance through better criteria for selecting projects and promoters. Second, streamlining of loan processing procedures for SSEs could hold down administrative costs. Third, an increase in BRD lending rates would help improve its average spread. Andfourth, access by BRD to an effective guarantee scheme would help minimize the financial impact of bad SSE loans. On the basis of the above, BRD estimated it should be able to break even on SSE lending with a spread of about 7%. If this proves insufficient, BRD nevertheless enjoyed sufficient profitability on lending to large enterprises that it could absorb some of the costs of an expanded program for SSEs. 2.23 Gi-ven the structure of Rwanda economy, BRD knew it had to move more forcefully into SSE lending. As indicated in para. 1.08, 60% of industrial value added is generated by small enterprises which also provide employment for 26,000 people, i.e., about 65% of the industrial labor force. The devei.,pmen- potential for SSEs is significant and this sector can help solve Rwanda's pressing unemployment problem. However, given the risks involved and the need for more experience with this type of lending, BRD decided to proceed with caution and developed a two phase program to assist the SSE sector. In the first phase, the main emphasis was put on (i) selecting and financing the large number of unsatisfied SSE loan applications which have not been investigated in the past, and (ii) adapting BRD's loan processing procedures and organization structure to facilitate SSE lending. In the second phase, which is expected to begin in late 1985, BRD intends to take a more active, promotional role with more emphasis put on assisting small entrepreneurs. The first phase of BRD's SSE program was supported by the third IDA credit to BRD (Cr. 1344-Rw) which also provided funds to help the Government carry out a study on the issues affecting SSEs (para. 1.12). The proposed project will help BRD carry out the second phase of its SSE program. The results of the first phase are analyzed below. - 19 - Organization and Procedures 2.24 In March 1982, BRD's board approved the SSE program and authorized revisions of policies for SSE lending. A small enterprise lending division was created in BRD's Investment Department (para. 2.09). It consists of four analysts, of whom two are responsible for appraising manufacturing and services projects and two for agro-industrial and other projects. The four staff approved 45 SSE projects in 1984, i.e., more than 11 projects per staff, which is a good performance considering that only about 20Z of projects submitted by promoters are finally approved. 2.25 To accommodate small borrowers, BRD also increased its financing limit for SSEs to 80% of total project cost, while it normally lends only up to 50%-65% for large and medium-sized projects. 2.26 With regard to procedures, BRD simplified application forms, appraisal reports and loan contracts. While promoters of larger projects are required to prepare and present appraisals on their own, BRD's SSE team is providing assistance in this area free of charge to its SSE clients. It also follows a tightly monitored and very active supervision schedule. All active SSE projects are visited between one to three times per year, depending on their implementation status and performance. Should a loan have arrears of over six months, it will be monitored much closer and clients who are one year and more behind in repaying can be taken to court _/ upon the decision of the Managing Director. 2.27 To protect its SSE portfolio against risks, BRD established its own guarantee fund in 1982 as a complementing measure of the SSE pilot program, using counterpart resources under KfW lines of credit. 5/ Beca-.se many promoters of small enterprises have insufficient assets to offer as security for loans, BRD believed that such a guarantee scheme would serve as an important measure to support an expanded SSE lending role by reducing the provision costs, which can be high for this type of lending and would have to be made out of its income from loans, thus depressing profits. The equivalent of US$190,000 are currently available in BRD's guarantee fund. Compared with the Special Guarantee Fund (paras. 1.22 to 1.24), which guarantees only 80% of outstanding principal, BRD's own fund covers IOOX plus interests. Because the SSE portfolio is still young (most SSE loans were approved in 1982-84) and of good quality, BRD has not actively drawn on the scheme. When the functioning of the national Special Guarantee Fund is improved, BRD intends to review with KfW the future use of the funds under A ts guarantee scheme. 4/ The legal processing time varies in Rwanda. To get a judgement takes between six months and three years. So far, BRD has prosecuted ten of its clients and actually sold goods of delinquent clients to compensate for outstanding repayments. 5/ BRD charges its clients an average interest rate of 12%. The cost of KfW funds is about 4% but BRD can only take 5% to cover its lending cost. The remaining 3% is put into a special account and can only be used with KfW's agreement. BRD requested and KfW agreed to use these funds for the guarantee scheme. - 20 - Preliminary Results of the SSE Pilot Program 2.28 As of December 31, 1984, BRD's SSE portfolio amounted to RwF 277.3 million (US$ 2.6 million). The SSE portfolio is healthy, with arrears of more than three months representing only 7% of the total portfolio (para. 2.37). Despite this good performance, BRD did not make any profit from its SSE lending as a result of a relatively low average lending rate of 11.5X. 6/ Although SSE related administrative costs decreased from 7.9% of SSE portfolio in 1983 to 6.1% in 1984, the remaining margin of 5.4% was barely sufficient to make adequate provisions (3%) and cover financial charges. 7/ BRD believes there is still room for improvement as a result of increased productivity of its SSE staff and forecasts a reduction in SSE related administrative costs to 4.5%-5.0% in 1985 and 1986. This, coupled with the proposed increase in BRD's lending rates to 121% and 13+% (paras. 2.19 and 3.05(ii)) under this credit, should improve the profitability prospects for SSE lending. D. Operations 2.29 Over the past six years, BRD's operations have undergone a significant shift in four respects: (i) loan maturities have moved from medium-term towards relatively longer terms; (ii) the average size of projects has decreased because of an increase in SSE lending; (iii) the mix of projects has become more evenly distributed among sectors; and (iv) the geographical distribution of projects has widened. 2.30 As of December 31, 1984, BRD had approved loans and equity investments totalling RwF 3.8 billion, or the equivalent of US$36.2 million. Virtually all of BRD's financing has gone to private (or majority private) enterprises. While most of the equity investments were made before the mid 1970s, loan approvals started to become important in 1974 when they amounted to RwF 163 million (US$1.6 million). Since then, they have risen rapidly to reach RwF 616 million (US$5.9 million) in 1984. This growth in approvals has mainly been the result of a surge in long-term lending. As Table I shows, medium-term loans, which in 1979 made up 74% of total approvals, represented only 1.3% in 1984. 6/ BRD does not give any preferential treatment to SSEs. The relatively low interest rate for SSEs compared to larger projects is due to the fact that most SSE projects were for processing of agricultural ?roclucts and carried lower interest rates. 7/ BRD does not yet have a separate accounting system for SSEs but since 1982 it keeps, to the extent possible, separate operational data for SSEs, which enabled it to make this retroactive analysis of the cost of SSE lending. - 21 - Table 1: BRD's Loan Maturities (% of Loan Approvals) 1979 1980 1981 1982 1983 1984 I - 4 years 74.0 11.7 2.1 2.1 5.7 1.3 Over 4 years 26.0 88.3 97.9 97.9 94.3 98.7 Total 100.0 100.0 100.0 100.0 100.0 100.0 Source: BRD. 2.31 The size of the projects financed by BRD varies from less than RwF 1 million (US$9,520) to over RwF 200 million (US$1.9 million). The volume of BRD's operations has thus fluctuated from year to year, depending on the financing of a few large projects. Since 1982, SSE lending has become an important part of BRD operations. Loans to SSEs averaged 83% of the number and 21% of the amount of all BRD operations for the three years to December 31, 1984. With the increase in activities, the sectoral mix of BRD-financed projects has also changed significantly. In the early 1970s, the transport and tourism sectors were the main focus of BRD's lending. In the late 1970s and early 1980s, manufacturing predominated and by 1982 accounted for 92% of approvals. Over the last 2 years, however, the sectoral mix of BRD's project approvals has been more evenly distributed among manufacturing and agro-industry (34%), agriculture and livestock (22%), hotels and tourism (21%), and other services (23%). 2.32 At the same time that BRD began its thrust into SSE lending, the institution decided to decrease its hitherto geographical concentration in Kigali by accelerating activities in other regions and diversifying into agriculture. This has resulted in a shift in the regional distribution of BRD's projects. Prior to 1982 all BRD projects originated from 3 regions (Kigali, Kibungo and Byumba). In 1982, coverage was expanded to 7 regions and, by 1983, all 10 regions were covered. The rate of commitments and disbursements have kept pace with the rate of approvals. 2.33 Generally BRD limits its total lending to a single enterprise at 20% of its own net worth in order to spread the risks over its portfolio. During 1982-84, BRD approved 129 projects with a total cost of RwF 2.8 billion (US$26.7 million); it financed RwF 1.4 billion (US$13.3 million) and thus helped mobilise an additional RwF 1.4 billion (US$13.3 million) worth of investments. The projects typically have financial rates of return in excess of 15% and an estimated investment (including initial working capital) per job created in the range of $3,000-$8,000 for small projects, and $20,000-$30,000 for medium and large projects. - 22 - E. Portfolio and Provisions Loan Portfolio 2.34 BRD's loan portfolio as of December 31, 1984 amounted to RwF 1,975 million (US$18.8 million) and is distributed as follows: industry including mining 28%, agro-industry 16%, agriculture 8%, transport 9%, hotels and tourism 4% and other sectors 35%. Long-term loans made up RwF 1,577 million (US$15.0 million) and accounted for 80% of the portfolio. The majority of BRD's projects (77%) are totally owned by private Rwandese entrepreneur- About half of the projects wpre approved recently, and the portfolio is thus relatively young, with many projects just starting operations. Those in operation are generally profitable, with the notable exception of two large projects: Rwakina (US$2.0 million) and SOMIRWA (US$0.8 million). These two problem projects account for 76% of the portfolio affected by arrears and 69% of actual arrears (para. 2.38). 2.35 The Rwakina project (Annex 21), approved in 1980, was designed to use cinchona rinds to produce quinine sulphate and other pharmaceutical products. However, the project was poorly designed and incurred substantial cost overruns during construction. Total cost, estimated at about US$4.4 million in 1980 and financed by US$2.4 million equity (of which 51% provided by Isochem, a French manufacturer of pharmaceutical products and promoter of the project) and a US$2.0 million BRD loan, increased to US$6.6 million when the project was completed in 1983. The large cost overrun was covered by short-term loans from local and foreign banks and caused the company to become overleveraged, thus straining its financial base. The project also encountered management, technical, marketing and supply difficulties and ceased operating in November 1983, three months after the factory opened. In mid-1984, BRD reexamined the project's feasibility and developed an action program to put Rwakina back into operation. The main elements of that program are: (i) rescheduling of about RwF 104 million (US$1.0 million) debt arrears to banks, including BRD; (ii) injection of about RwF 56 million (US$0.5 million) for working capital and plant cleaning; (iii) appointment of a new management; (iv) establishment of a system to ensure availability of cinchona; (v) signing of a marketing and technical assistance agreement with a pharmaceutical manufacturer; and (vi) agreement with a local bank for export credit. BRD is cuTrently discussing this action program with the shareholders and Rwakina's lenders which have in principle agreed to the debt rescheduling and injection of about RwF 34 million new equity. 2.36 SOMIRWA is the largest company in Rwanda with a share capital of RwF 893 million (US$8.5 million) held by the Government (49%) and Geomines S.A. of Belgium which also manages the company. SOMIRWA dominates the mining sector in Rwanda and employs about 6,000 people. The project, which was approved in 1979, aimed at rehabilitating SOMIRWA's mining - 23 - operations and carrying out further mineral exploration. BRD's original loan of RwF 150 million (US$1.8 million at the 1979 exchange rate) represented 46% of the project's estimated cost of US$4.0 million. As in the Rwakina case, implementation encountered difficulties. Due to high inflation in suppliers' countries, technical problems, but also underestimation of costs, total investment cost was 75% more than the amount forecast at appraisal. SOMIRWA financed the cost overrun with its cash generation which was high during the late 1970s as a result of favorable world market conditions. Since the last three years, however, SOMIRWA's financial situation has been deteriorating steadily due to lower market prices, management problems, declining production, high production cost and the compounding effect of an acute cash shortage. As a result, the company has been accumulating substantial losses and has recently filed for bankruptcy. The Government is studying the feasibility of rehabilitating the mining sector. For its part and consistent with its prudent financial policy, BRD has started to write off the SOMIRWA loan. BRD provided for 502 of the US$0.8 million outstanding in 1984 and plans to provide for the rest in 1985. SSE Portfolio 2.37 As of December 31, 1984, the SSE portfolio amounted to RwF 277.3 million and accounted for 11.5% of the total portfolio outstanding. The composition of the SSE portfolio is diverse and contains projects of the following nature: livestock (30%), agriculture (24%), industrial activities such as metal workshops, printing, food processing etc. (15%), bakeries (10%), services such as hotels and garages (8%), mills (6%) and others (7%). All SSE projects are owned and managed by private Rwandese entrepreneurs. The SSE portfolio is healthy, with total arrears of more than 3 months amounting to RwF 17.0 million (7% of SSE portfolio) as of December 31, 1984, and with only one SSE project considered doubtful or bad. This doubtful project 8/ accounted for 45% of the SSE arrears and BRD plans to write it off. 8/ The KABALIRA artisan project was financed in 1980 out of BRD's own resources with a subloan of US$80,000 equivalent to produce tools. After its one year grace period, the enterprise was unable to service its debt beyond the first instalment because the establishment of several new tool making cooperatives in Kigali (assisted by ILO) rendered it overdimensioned and unprofitable. - 24 - Arrears and Provisions 2.38 Total arrears of more than three months at the end of 1984 amounted to RwF 138.4 million (US$1.3 million) and affected 39 projects with a total loan amount outstanding of RwF 374.9 million (US$3.6 million) (Annex 17). Nineteen percent of the portfolio was thus affected by arrears and total arrears amounted to 7% of loans outstanding. Fifty ;our percent of the arrears was in manufacturing including mining. anrd almost wholly comprised the overdue principal and interest on the aOMIRWA account. There were no arrears on transport sector projects and the rest was made up of projects in agro-industry (18%), hotels and tourism (1X), agriculture and livestocks (1%) and other projects (26%). BRD has made specific provisions of RwF 73.6 million (US$700,000). Also, there is a reserve for general risk of RwF 64.8 million (US$620,000), representing 3.3% of the outstanding portfolio. 2.39 Although the quality of BRD's portfolio is good and adequate provisions have been set aside for possible losses, its collection performance has not improved much over the last two to three years and has remained under 100%. In 1984, of the RwF 305.9 million (US$2.9 million) in principal billed, only 89% (US$2.6 million) was collected as compared with an average of 86% over the previous three years (Annex 19). If the collection ratio remains at this level, arrears are bound to increase at a time when BRD is reorienting its lending strategy towards SSEs, a sector known to be more risky. Against this background, a major objective of this project is to assist BRD in improving its arrears positicn. At negotiationis, BRD agreed to set targets for gradually improving its collection ratio 9/ as follows: 95% in 1985, 100% in 1986, 102% in 1987 and 105% in 1988 Tpara. 4.02(b)(i)). The results obtained will be submitted to IDA quarterly. During supervision missions, IDA will also closely monitor BRD's collection performance, assist BRD in implementing the action program for the Rwakina project and ensure that the SOMIRWA project is adequately provided for. Equity Portfolio 2.40 At year end 1984 BRD held eqvity investments totalling RwF 335 million (USS3.2 million) in 14 companie.3. According to its Policy Statement, BRD's participation should not exceed 50% of an enterprise's share capital unless the Board unanimously decides otherwise. Accordingly, BPD has minority holdings ranging up to 25.2%, except for MAGERWA, a 9/ The collection ratio is defined here as the ratio between all collections during the year (including collection of arrears) and new amounts coming due during the year. - 25 - large warehousing company, where BRD holds 68.7% of the capital. This project is also BRD's largest equity investment (RwF 82.5 million, or US$785,000) and has been providing BRD with consistent and substantial income. Over the past seven years total cash and stock dividends of RwF 202.3 million (US$1.9 million) received from MAGERWA were almost two and a half times BRD's initial investment. Two other investments yielded dividends in the last three years and two more are expected to start doing so in 1986. F. Financial Results and Condition Profitability 2.41 Financial Results. Annexes 9 to 11 show BRD's income statements, balance sheets and the relevant financial ratios for 1980-84. Income from loans showed strong growth over the last 5 years, surging at an annual compound growth rate of 22Z from RwF 99.9 million (US$950,000) in 1980 to RwF 223.6 million (US$2.1 million) in 1984. The surge in loan income was a result of two factors: (i) the loan portfolio almost doubled between 1980 (RwF 1,016 million, or US$9.7 million) and 1984 (RwF 1,975 million, or US$ 18.8 million); and (ii) BRD interest rates went up by an average of two points during the 1980-84 period. Consequently, BRD's total income for 1984 increased to RwF 274.8 million (US$210,000), or 15.4% above the 1983 figure. BRD's 1984 net profits (RwF 22.1 million) were, however, significantly lower after a strong showing in 1982 (RwF 72.5 million, or US$690,000) and 1983 (RwF 70.4 million, or US$670,000). This was primarily due to record provisions of RwF 107.4 million (US$1.0 million) to reflect the condition of the RWAKINA and SOMIRWA projects. In 1984, BRD provided for half of SOMIRWA's RwF 80 million (US$762,000) outstanding loan and intends to provide for the remainder in 1985. The 1984 provisions amounted to 5.7% of the average loan portfolio, up from 2.5% in 1983. BRD's dividend income was unchanged at RwF 21.0 million (US$200,000) for the third year in a row. As in the past, most of the dividend income came from the MAGERWA investment. In 1984, income from loans as a percentage of average total assets was 7.6% and that from dividends was 0.7%, as compared to 7.4% and 0.8% respectively for 1983. 2.42 Total expenses rose 51% from RwF 167.7 million (US$1.6 million) in 1983 to RwF 252.7 million (US$2.4 millidn) in 1984, mainly as a result of the increased provisions. Financial charges as a percentage of the average debt increased from 4.1% in 1983 to 4.7% in 1984 and reflected the increasing cost of BRD's borrowings. Administrative expenses were, however, tightly controlled, and amounted to 2.3% of the average total assets, down from 2.5% in 1983. Following a long standing provisions policy, an amount equivalent to 3% of the increase in the actual outstanding loan portfolio was charged against income to maintain a reserve account for general risks. In addition, RwF 38.9 million (US$370,000) was set aside to increase specific provisions for doubtful and bad loans. Total provisions therefore reached 5.7% of average loan portfolio as compared to 2.5% in 1983 and reduced the return on average net worth to 1.6%. - 26 - 2.43 SSE Impact on BRD Performance. In order to assess the impact of SSEs on its performance, BRD undertook in early 1985, an analysis of its small scale operations. This analysis revealed that financing SSEs was more costly than lending to larger enterprises, but that SSEs performed equally well, and sometimes better, in servicing their loans. As a percentage of the average SSE portfolio, the cost of lending to and administering SSE loans was 6.7% in 1984 (compared to 4.2% for BRD's total loan portfolio). The level of provisions considered adequate was however lower for SSE loans (3%) than for the total portfolio (5.7%). In order to compensate BRD for the higher cost of SSE lending, it was agreed at negotiations that the onlending rate for the portion of this Credit allocated to small scale financing be 7%, about one and a half percentage points lower than that for larger enterprises (para. 3.05(i)). 2.44 Financial Condition. BRD is a financially sound institution. Over the past 5 years, its term debt/equity ratio has never exceeded 1:1 and at December 31, 1984 stood at 0.9:1.0, well within the 3:1 limit agreed with IDA. BRD's debt service coverage ratio is also good at 2.0. The institution is immune to exchange rate fluctuations on its borrowings because the Government bears the foreign exchange risk on the portion of term debt which comes from foreign sources. BRD has substantial equity resources and 47% of all assets were financed from net worth. Its loan portfolio is protected because it has made adequate provisions for possible losses. Resources 2.45 The Basic Data show BRD's resource position as of December 31, 1984, when resources available for iew approvals totalled RwF 221.7 million (US$2.1 million). RwF 11.6 million (US$110,500) of this was in local currency and the foreign currency portion of RwF 210.1 million (US$2.0 million) comprised mainly the uncommitted balance of Cr. 1344-Rw. The low local currency resources should improve with the expected collection of RwF 313 million (US$3.0 million) in loans repayments in 1985, of which only 75% have to be immediately reimbursed to lenders. In addition to its equity, BRD's local resources include loans from the central bank and Government, two investment funds and retained earnings. 2.46 BRD's foreign exchange resources consisted of eight lines of credit from four different donors (KfW, CCCE, IDA and EIB) totalling RwF 1.3 billion (US$12.6 million) and a large credit line provided by the BNR (Annex 6). Interest rates on the foreign loans range from 0.75% to 6.9% and maturities are from 9 to 50 years, with grace periods of up to 10 years. The CCCE loan is tied to French procurement and was intended to finance a specific project at 9% interest rate. The BNR line of credit has relending rates of 8-12% depending on the maturity of subloans and the sector. All other loans are relent at BRD-established rates and carry no restrictive conditions. The Government bears the exchange risk on all foreign currency loans. - 27 - G. Prospects BRD's Strategy 2.47 In its formative years, BRDts main objectives were to build up a strong project appraisal and supervision capability and a solid financial base through the financing of relatively large quality projects. Now that these objectives have been achieved, BRD's strategy is to take a lead role in the financing and promotion of SSEs and agriculture, two sectors essential to the development of Rwanda. As part of this strategy, BRD took the lead in the SSE study financed under the third IDA credit and is involved in Government proposed improvements of the policy framework for promotion of Rwandese SSEs. It also intends to carry out a phased establishment of small regional offices to better assist clients in the interior of the country. The attention being given to SSEs by the Government shows that BRD's focus is appropriate and a recent review of its SSE experience coupled with its continued tight supervision of small projects indirate that BRD's portfolio quality is not likely to be lowered by its new chrust. With regard to agriculture lending, BRD has so far a successful record, with loans arrears in this sector representing only 1% of total arrears (para. 2.38). Two of its professional staff are experienced agronomists and BRD is planning to increase its technical expertise in this area. Finally, BRD has indicated its intention to improve its technical capability in agro-related lending. Projected Operations 2.48 Projects Pipeline. As Rwanda's major institution providing term finance for development projects, BRD has a strong project pipeline for the next two years which far exceeds its resource availability for that period. Although it is still reviewing its pipeline, BRD's tentative list of projects includes 23 medium and large operations with a total investment cost of about US$70 million and numerous SSE projects. Although the level of possible BRD financing is yet to be decided for a number of large projects, BRD has already been approached for about US$14 million. Over the last two years funding requests from SSEs had increased at a high rate (BRD approved an average of US$1.5 million/year of SSE loans in 1983-84) and BRD expects this trend to continue, especially after the establishment of its two field offices this year. The majority of the projects in the pipeline are in industry and agriculture and include carpentry, brickmaking, soft drinks, plastics, metal working, vehicle repair, cattle ranching and grain milling. - 28 - 2.49 Forecast Operations. BRD's operational forecast is shown in Annex 12. Despite the strength of its project pipeline (para. 2.48), BRD plans to maintain a prudent approach to approvals, particularly because it recognizes the potential risks in proceeding too fast with SSE operations, its new area of activity. Because of this and the fact that forecasts are based on the operations of a particularly active year (1984), the projections assume a steady but cautious 5% growth in current terms in loan approvals over the next 3 years. The level of commitments and disbursements is related to the level of approvals on the basis of BRD's experience in recent years. Total approvals are projected to grow from RwF 700 million (US$6.7 million) in 1985 to RwF 795 million (US$7.6 million) by 1988. Commitments over the same period (which is equivalent to the commitment period of the proposed credit) are expected to total US$28.5 million of which about 66Z is in foreign exchange. Disbursements over the period total about US$26.5 million. BRD's forecast of operations is realistic. Resource Requirements 2.50 BRD's estimated resource needs for the period January 1985 to December 1988, and their financing plan are as follows: - 29 - Financing Plan, January 1985 - December 1988 (US$ million) Local Foreizn Total Total Expected Commitments: (Loans & Equity Investments) 9.6 18.9 28.5 Resource Available for Commitments: as of December 31, 1984: 2.9 3.4 6.3 of which: Uncommitted Approvals 2.6 1.4 4.0 Bank Building Construction 0.2 - 0.2 Available for New Approvals 0.1 2.0 2.1 Resource Gap: 6.7 15.5 22.2 = Financed by: 6.7 15.5 22.2 =c . = Local Currency: Net Cash Generation, Loan Collections, and Rolled Over Donor Funds 6.7 - 6.7 Foreign Currency Identified Sources - 14.4 14.4 EDF - (0.4) (0.4) African Development Fund - (5.0, (5.0) IDA IV - (9.0) (9.0) Possible Sources (FMO, etc.) - 1.1 1.1 2.51 As of December 31, 1984, BRD had foreign exchange resources available for commitment of US$3.4 million equivalent. Foreign exchange commitments by BRD for the 1985-1988 period are estimated at about US$18.9 million equivalent. BRD thus has a foreign exchange resource gap during this period amounting to US$15.5 million. The proposed credit (US$9.0 million equivalent) will help meet 58% of BRD's foreign exchange gap during 1985-1988. BRD has obtained from the African Development Fund - 30 - a line of credit in the amount of US$5.0 million equivalent and from EDF (European Development Fund) about US$0.4 million. It is actively pursuing other sources of funds such as the FMO to cover the remaining gap ($1.1 million equivalent). 2.52 BRD's local resources will be sufficient to meet its local financing needs over the next 3-4 year . In addition to the US$2.9 million equivalent available for commitments at December 31, 1984, BRD expects large inflows of local currency resources coming from loan repayments by clients. Therefore, BRD's total net cash generation would be enough to finance loan repayments and the local currency component of projects. Projected Financial Condition and Results 2.53 Annexes 13 to 16 show forecasts of BRD's income statements, balance sheets, sources and uses of funds, and financial ratios for the period 1985-1988. These forecasts are presented in current terms and assume an increase in the cost of BRD's new borrowings to 8% p.a., which is realistic considering the proposed average onlending rate under the proposed IDA credit (8% p.a.) and the lending conditions of other BRD's important potential lenders. In the face of increasing cost of resources and given the necessity to continue making substantial provisions mainly for two large bad loans, BRD will have to increase its interest rate, the major source e_ its income. An increase in BRD's lending rate is also necessary to improve the profitability of its SSE operations (paras. 2.28 and 2.43). At present BRD charges clients an average interest rate of about 12% which, if remained unchanged, would leave it with a spread of only 4% on its new borrowings. Even taking into account the low cost of existing debt and the comfortable local resource position, such a spread is insufficient to maintain profitability in the medium-term. For these reasons, at negotiations of this credit, an agreement was reached with BRD to increase the interest rate charged to clients to 121% for productive projects and 131% for services projects, levels which would permit BRD to have an average spread of about 5% on its new borrowings (para. 3.05(ii)). 2.54 On the basis of the above assumption regarding the cost of new borrowings and BRD's final rate to clients, BRD's net income is expected to resume a steady rise from its low point in 1984-85 (a result of the conservative provisions policy), until it reaches about RwF 54 mil'lion (US$514,000) in 1988. Although this is still depressed in real terms compared to past years, it conceals an underlying financial strengthening of BRD reflected in the conservatism of its provisions and gives the institution substantial upside cash flow gains, while minimizing its downside risk potential. - 31 - 2.55 Loan income is expected to grow from RwF 258 million (US$2.5 million) to RwF 370 million (US$3.5 million) between 1985 and 1988 and to range between 12.3% and 12.7% of the average loan portfolio. BRD's other sources of income are small compared to loan income and consist mainly of dividends and incouie fronm renting out part of its new headquarters. These increase from RwF 47 million (US$450,000) in 1985 to RwF 52 million (US$495,000) in 1988. The cost of debt, although still low as a percentage of average loan portfolio (4.1% in 1988), would increase from 5.5% of average debt, in 1985 to 6.6% in 1988 reflecting the higher cost of new borrowing. Administrative costs are, however, expected to be tightly controlled and kept within 2.5% - 2.6% of average total assets. Provisions and depreciation taken together remain at a high level of 4.1% of average assets. As a result, net income as a percentage of average net worth will rise gradually from 1.9% in 1985 to 3.6% in 1988. 2.56 Despite the modest net income levels compared to past years the projections indicate that BRD's financial structure will remain sound. Over the period 1985-88, BRD's debt to equity ratio is not expected to exceed 1.2 to 1, well within the 3 to 1 limit currently imposed in legal agreements with IDA. This limit will be retained under the proposed project. The debt service coverage ratio should also remain satisfactory and above 2 at all times. As with most of the DFCs in the region, BRD's asset/liability structure is expected to retain its current favorable characteristics (i.e. debt liabilities will continue to have much longer maturities than loan assets). This should contribute to BRD's financial strength, allowing the institution to remain liquid over the forecast period, and enabling it to overcome any portfolio problems in the foreseeable future. - 32 - III. THE PROJECT A. Project Objectives and Justification 3.01 The proposed credit would represent a continuation of IDA's support to an effective financial intermedia-y -- the main instrument in Rwanda for developing the private sector and, particularly, the SSE sector -- to help it continue prwviding term financing to well-designed development projects. Specifically, the objectives of this project are: (a) to assist BRD as it moves more forcefully into the areas of SSE and agricultural lending, two sectors essential to the development of Rwanda; (b) to improve BRD's economic evaluation of projects; (c) to provide the needed foreign exchange resources for priority capital investments promoted by private entrepreneurs; and (d) to help improve the policy framework for SSEs and to develop indigeneous entrepreneurial capabilities in Rwanda; 3.02 The rationale for IDA's involvement in the project is to assist the Government in developing SSEs, a sector which has the potential to help solve Rwanda's pressing unemployment problem. IDA's continued assistance to BRD is also necessary to sustain this institution's effectiveness as it is going through a major reorientation of its operations towards SSEs and agriculture. B. Description and Conditions of the Project The Proposed Line of Credit to BRD (SDR 8.5 million) 3.03 The proposed IDA credit of SDR 8.5 million would be made to the Government of Rwanda which would onlend it to BRD under a Subsidiary Agreement satisfactory to IDA, the signing of which would be a condition of credit effectiveness. - 33 - 3.04 The Credit would finance the foreign exchange costs of capital investments, including initial permanent working capital, in subprojects approved by BRD. The funds would be available to finance all subprojects that are within BRD's scope of operations. Of the total amount of SDR 8.5 million, SDR 4.7 million would be used for financing medium-sized projects and SDR 3.8 million would be for SSEs, defined as enterprises with net total assets before the project of less than RwF 30 million (US$285,000). The maximum loan size for SSE subprojects would be US$230,000. Subprojects financed will have to be of high economic priority, be selected by BRD in accordance with its investment strategy and he justified on the basis of a full economic analysis, including calculation of the economic rate of return for all non-service sector projects above US$200,000. SSE projects will be selected and appraised according to BRD's simplified format. 3.05 Lending Conditions. The following agreements were reached with Government and BRD at negotiations: (i) Onlending rates and foreign exchange risk fee. Consistent with Bank policy for IDF operations, funds for lending to large enterprises (US$5.0 million) would be passed on by Government to BRD at IBRD's interest rate in effect at the time of distribution of credit documents to the EDs. However, recognizing the higher administrative costs and risks associated with SSE financing, funds for lending to small enterprises (US$4.0 million) would be onlent at a lower rate of 7% so as to afford BRD a greater spread. The foreign exchange risk would be borne by the Government. The average cost of IDA funds for BRD would be about 8%, compared to about 7% under the third IDA credit. The 8% average cost of IDA funds to BRD is positive in real terms as inflation in Rwanda is estimated at about 6.0%-6.5%. (ii) BRD's lending rates. BRD's present interest rate structure (Basic Data), which consists of six rates differentiated 'y term (medium- and long-term loans) and sector (agriculture, including livestock, industry and services), would be further simplified. There would be only two rates: one for the productive sectors which BRD agreed to set at 12+%, and one for services projects which would be 13+%. These new rates would represent an increase of 0.5 to 2.5 percentage points over the present rates and are highly positive in real terms with inflation forecast to be about 6%-6.5% in the next few years. They would give BRD ar. average spread of about 5% which is necessary to cover administrative costs and make adequate provisions. ERD's level of interest rates would be reviewed with IDA at least once a year to ensure that they remain positive in real terms and that the resulting spread is adequate for BRD's continued financial soundness and profitability. (iii) Commitment charge. As under the previous IDA credits, BRD would pay to Government a commitment charge of 0.75% from the respective dates of subproje't approval by IDA. - 34 - 3.06 Free limit. The free limit for individual subprojects would be increased from US$200,000 under the third IDA credit to US$300,000 in recognition of the good quality of BRD's appraisals. The aggregate free limit would be US$3.5 million, or 39% of the total amount of the Credit. As all SSE subloans would be below that free limit, IDA would review in detail the first 10 SSE subprojects submitted by BRD. 3.07 Amortization schedule. In conformity with the normal Bank Group lending policy to DFCs, funds for lending to large enterprises (US$5.0 million) would have a flexible amortization schedule that would substantially conform with the aggregate of the amortization schedules of the subloans approved by BRD and financed under the proposed credit, subject to a maximum of 15 years, including a grace period not to exceed five years. Given the large number of small loans expected to be financed under the SSE component, the portion of the credit onlent to BRD for this purpose (US$4.0 million) would have a fixed amortization schedule of 10 years, including five years of grace, starting from the date of credit effectiveness. 3.08 Commitment period. The funds would be available for commitment by BRD until December 31, 1988. 3.09 Debt/equity ratio. The limit on BRD's debt/equity ratio would remain at 3:1. C. Total Project Costs 3.10 As discussed in paras. 2.50 and 2.51, total subloan commitments by BRD during the period covered by this project are estimated at US$28.5 million, of which US$18.9 million would be in foreign exchange. In the past, BRD financed on average about 50% of the total investment cost of large projects and about 80% of the cost of SSE projects. Thus, the US$28.5 million forecast commitments would result in about US$53 million of investments. As in the past, projects financed under this proposed credit are expected to show high economic and financial rates of return. D. Project Implementation Reporting Requirements 3.11 As it was done under previous IDA credits, BRD would be requested to submit to IDA quarterly reports, which would include, inter alia, financial statements, resource position, statement of arrears, collection targets and results obtained and notes on major projects in difficulty, including the conclusions and recommendations of BRD's supervision staff. Annual reports and audited annual accounts prepared by qualified accountants acceptable to IDA will be submitted to IDA within six months after the end of the year. BRD would also submit a draft Project Completion Report when the project is completed. - 35 - Procurement and Disbursement 3.12 Procurement for the subprojects financed would be in accordance with BRD's procedures which require clients to submit at least three quotations. These procedures are adequate for the size of procurement packages expected. 3.13 Proceeds of the Credit would be disbursed as follows: (i) 100% of the cif cost of goods and services for eligible subprojects; (ii) 80% of the cost of previously imported equipment purchased locally for the subprojects; (iii) 70% of the cost of equipment produced in Rwanda from imported components and raw materials; and 65% of the local cost of construction works included in subprojects and carried out by locally based contractors. 3.14 Special Account. To expedite disbursement of funds, a special account would be set up at BNR or other financial institution acceptable to IDA into which Ir. would make an initial deposit of US$300,000 equivalent from the proposed credit immediately after effectiveness. This amount represents an estimated average disbursement of funds over a three-month period. The account would be replenished when funds are below US$150,000. Its establishment was discussed and agreed with BRD and Government at negotiations. 3.15 Disbursem2nts and Documentation: Withdrawal of subloan funds not exceeding US$25,000 would be made out of the special account on the basis of statements of expenditure (SOE's). The documentation for withdrawals made under SOEs would be reviewed by supervision missions and by independent auditors. Disbursement of funds for subloan withdrawals in excess of US$25,000 could also be made from this account, but will be fully documented to the Bank. The projected disbursement schedule is shown in Annex 22 and is based on the disbursement profile for IDF projects in Eastern and Southern Africa Region, but modified to reflect the experience of the relatively fast disbursing first and second BRD credits. Disbursements are expected to be completed over seven and a half years, by December 31, 1993. - 36 - E. Benefits and Risks 3.16 The proposed project would provide term investment resources to help the development of Rwanda's private sector and particularly SSEs. It is expected that the US$9 million Credit would support investments totalling about US$15.0 million and would help create more than 1,500 new jobs in the Rwanda economy at an average cost per job of US$10,000. The project would enable IDA to continue supporting BRD, the major term lender in Rwanda, in its efforts to assist small enterprises. Continued IDA support would also enhance BRD's capability to mobilize additional foreign exchange resources from other lenders and enable it to play a more significant role in the development of Rwanda economy. Finally, the project would play an important role in initiating a dialogue with the Government on the reform of the tariff structure and in improving the policy framework for SSEs. 3.17 The main risk in this project relates to the possible deterioration of BRD's arrears position. This risk is, however, limited because (i) BRD has developed a sound program for assisting the SSE sector, the first phase of which has yielded encouraging results; and (ii) BRD has already initiated actions to deal with its two major problem projects and additional measures are proposed in the context of this project to improve its collection performance, which will be closely monitored by IDA. This should ensure that BRD will remain an effective term lending institution that promotes economically justified investment projects. - 37 - IV. AGREEMENTS REACHED AT NEGOTIATIONS 4.01 This report recommends an IDA credit of SDR 8.5 (US$ 9.0 million), to be onlent to BRD for financing the foreign exchange cost of its subloans. 4.02 At negotiations, the following agreements were reached: (a) From Government that it will: (i) review with IDA by July 1, 1986 the recommendations of the tariff study including the proposed timetable for introducing changes (para. 1.17); (ii) onlend to BRD the line of credit on the conditions specified in para. 3.05; and (iii) establish a special account at the central bank or other bank acceptable to IDA to facilitate disbursement of the credit funds (para. 3.14). (b) From BRD that it will: (i) set targets for improving its collection ratios and submit the results obtained to IDA (para. 2.39); (ii) onlend the proceeds of this credit at terms and conditions specified in para. 3.05(ii); (iii) review regularly with IDA the level of its interest rates to ensure that they remain competitive and positive in real terms and that its spread is adequate to ensure continued financial soundness and profitability (para. 3.05(ii)); (iv) continue to have its accounts audited by independent auditors acceptable to IDA and furnish to IDA certified copies of its audited financial statements along with its annual reports within six months after the end of each fiscal year (paras. 2.17 and 3.13); (v) continue to maintain its debt/equity ratio below the 3:1 limit (para. 3.09); and (vi) submit to IDA a draft Project Completion Report when the project is completed (para. 3.11). (c) Condition of Effectiveness: Signing of the Subsidiary Loan Agreement (para. 3.03). - 38 - BANQUE RWANDAISE DE DEVELOPPEMENT (BRD) List of Annexes Annex 1 : Production of Major Manufactures, 1977-82 Annex 2 : Structure of Interest Rates Annex 3 : Credit Outstanding by Term and Sector, 1978-83 Annex 4 : Distribution of Share Capital December 31, 1984 Annex 5 : Organizational Chart Annex 6 : Borrowings as of December 31, 1984 Annex 7 : Historical Operations Summary, 1981-1984 Annex 8 : Total SSE approvals, 1982 - 1984 Annex 9 : Summary Income Statements, 1980-1984 Annex 10 : Summary Balance Sheets, 1980-1984 Annex 11 : Past Financial Ratios Annex 12 : Projected Operations, 1985-1988 Annex 13 : Projected Income Statemenits, 1985-1988 Annex 14 : Projected Balance Sheets, 1985-1988 Annex 15 : Projected Sources and Uses of Funds, 1985-1988 Annex 16 Projected Financial Ratios, 1985-1988 Annex 17 Portfolio and Arrears Analysis as at December 31, 1984 Annex 18 Evolution of Collection Ratios, 1980-84 Annex 19 Characteristics of Sample of Projects Refinanced Under Previous IDA Credits Annex 20 : Performance of Selected SSE Subprojects Annex 21 : RWAKINA Subproj ect Annex 22 : Schedule of Disbursements Annex 23 : List of documents in Project File - 39 - Annex 1 BANQUE RWANDAISE DE DEVELOPPEMENT (BRD) Production of Major Manufactures, 1977-82 Units 1977 1978 1979 1980 1981 1982 Beer '000 bottles 54,275 63,578 53,630 70,192 83,168 87,343 Soft Drinks ,000 bottles 16,574 19,909 23,317 27,768 34,476 41,160 Banana Wine and Juice '000 bottles 43 518 462 259 489 508 Fruit Juices '000 bottles 734 61 40 39 n.a. n.a. Preserves tons 26 36 41 34 41 37 Sugar tons 2,229 2,265 2,355 2,364 2,368 2,367 Candies tons - - 110 - 394 378 Cigarettes '000 cartons - - 2,459 3,203 4,330 4,344 Matches '000 boxes - - - 2,167 14,801 17,604 Soap tons 2,986 2,382 3,867 5,280 6,761 7,133 Candle tons - - - - 13 29 Insecticide tons - - - - neg. 11 Paint tons 361 659 618 566 323 594 Tiles tons - 144 157 225 212 199 Lime tons 502 573 543 522 n.a. 349 Nails tons - - 569 413 888 926 Corrugated Iron tons - - - 1,842 4,439 5,787 Shoes 000' pairs - - 398 413 494 529 Pyrethrum Extract tons 60 50 42 51 n.a. 33 Blankets 000o pieces 159 179 161 196 193 209 Radio Receivers number 2,552 7,533 789 - - 4,218 Plastic Products tons - - - - 238 n.a. Tin tons - - - - - 908 Source: Data provided by the Rwandese authorities. Annx 2 L3AUE RWANDAISE DE DEVEILOPPEENOT (MMD) Structsra Of Interest Betes 1J (in pereent per swma) Before Effective N.. 1979 iov. 32, 1979 Natioonal Dak of Rba 1. Direct operattons with the pritvte ector a. Export credits 4.0 4.0 b. Imports of equipmnt goods and other easential coa.dities 5.0 7.0 c. Other credts 7.0 9.0 d. Penalty rate on credit not repaid by maturity date 9.0 12.0 2. Operations with bank. a. Advances agatnst coffee paper at the processing stag 3.5 3.5 b. Advances against export paper (coffee paper only up to 25 per cent of value) 3.5 3.5 c. Coffee suport paper above 25 per cent. of value 4.5 3.5 d. Advances against Treasury bi lls 4.0 6.n e. Rediscount of Treasury bills vith one onth to maturity and developsent bonds witb 90 days to mturity S.0 9.0 Deposit money banke 1. beposit rates a. Term deposits 2f I math 1.0 6.0 3 months 2.0 6.25 6 montbs 2.5 6.5 9 month 3.0 6.75 12 aonths 3.5 7.0 b. Savings bonds (certiftcares of deposit) 6 onths 1.0 -- 9 months 3.5 - 12 mnths 4.25 7.0 2 years - 8.0 3 year -- 8.5 4 years 90 5years 9.5 2. Lending rate 3/ a. Coffee financing collection (6 month.) 6.0 9.0 Processing (15 days) ) ) Storage (60 dqya) )RF 3.0 per kg) RI 3.3 per kg 4/ Exports (90 days) ) ) b. Tea and pyrethrus Storae (30 days) 6.0 - Exports (120 to 180 day.) 4.0 4.0 c. Mlninl operations Exports (120 to 260 days) 4.5 5.0 d. Other credit oParations lsports of essential comodities (one year) 9.0 9.0 Construction under RwF 4 aillion in coat 9.0 9.0 Other construction and current account advances (one year) 9.0 14.0 e. Investment approved by National Dank of Rwanda 11.0 5/ E. Other credit with 5 years maturity 9.0 - 13.0 13.0 ;in. g. Other credit with mturity greater than 5 years 13.5 sin. h. Penalty rate on loans that are not repaid on schedule 51 - additional 2 per cent during first 15 days of default - and additional 4 per cent for delays beyond 15 days Source: IMF and BIIR. AI Net of cow9iseions. TI The Interest rates onL deposits thai. require prior notice before wi thdrawal are 0.25 p.-rcenraeg point higher than those on regular fixed term. 31 A minnima charge of 0.75 per cent is levied on all financial operations that requtre repayments by installments. 41 Maximsan. Il Introduced in 1980. EAPID Apr!l 1985. Anne. 3 8AltUL IWAHDAIBC DE DEVCLOPPCEIN (SRO) Credit Outstandina by Tor. aOd Sector, 197S-d3 (Year 1od. lP milliou) 1979 198U IY81 1982 1953 1964 Short W. 4 Short M. *& Mrt Ht. & Short M. A Short H. b Shert K. Tarm L.T. Total Ters L.T. Total Term L.T. Total Term L.T. Total Term L.T. Total Tara L.T. Total ApteiaLtuta 31d Liveatock I/ 1.76b IS 1,785 2,bl9 19 2,b44 3,Sl 14 3,532 3,014 20 3,034 3,113 30 3,143 3,678 ISb 3,534 Mining 461 1 462 462 1 463 572 3 575 459 2 4*1 a 3 11 I15 2 11? Industry / 198 459 b57 33 7137 1,075 523 b58 I,ISI 1,300 b27 1.97 1,957 845 2,802 2,1U5 972 3,077 Conatructlon aed Public Works 232 7 239 527 2 529 445 3 448 261 5 26b 331 - 332 45 - 445 Comrc. 622 154 776 983 152 1,135 1,253 365 1,61b 1,454 452 1,708 1,738 460 I,782 2,032 404 2.,3b Sar,icaa 0 530 530 44 482 524 45 457 502 30 714 744 94 709 8b4 Sd 736 S24 lndividuals and NIecollaoaouj 29 922 951 47 992 1,059 112 1,234 3,340 l88 0 .J A 1, ,9 216 1,5U I2 275 1,07b 1981 Total 3,308 2,092 3.400 5,050 2,35 7,433 6,468 2,734 9,202 4,70d 3,2b1 9,969 7,457 3,414 11.131 S,73S 4,176 12,914 (X) (612) (392) (*002) (6823 (321) (*002) (702) (302) (3002) (472) (332) (*002) (472) (332) (1002) (452) (322) (*005) I_ Inludlng mrkating and export credits for coffee and tea. 2/ Includlngdi ato e ndustries and artleant, Soureel SUR, Swanda. - 42 - Annex 4 BANQUE RWANDAISE DE DEVELOPPEMENT (BRD) Distribution of Share Capital December 31, 1984 (RwF million) Authorised and Paid-in Capital X Public Sector 617.0 55.1 Government 526.3 47.0 OCIR-CAFE 44.6 4.0 OCIR-THE 10.1 0.9 Caisse Sociale du Rwanda 36.0 3.2 Domestic Private Sector 139.6 12.5 SONARWA 50.0 4.5 Banque Commerciale du Rwanda 30.0 2.7 Banque de Kigali 30.0 2.7 SOMIRWA 12.7 1.1 BRALIRWA 9.0 0.8 RWANTEX 1.8 0.2 SULFO-RWANDA 1.4 0.1 Other 4.7 0.4 Foreign Institutions 363.4 32.4 CCCE 100.0 8.9 rDEG 98.5 8.8 FMO 96.0 8.6 Belgian Government 60.0 5.3 Bank of Tokyo 8.9 0.8 TOTAL 1,120.0 100.0 Annex 5 BANQUE RWANDAISE DE DEVELOPPEMENT ORGANIZATIONAL CART | 30ard of Director [Administrative Council | anaging Director |Secretary Ceneral7 -----------------------------__--- gProject Co3aSttee| Internal Audit E | Internal Audit | - - --~------------------------------ Personnel C mittes Financial Inspection evieInetin Xnvestment Depart|[Finance Department Secretary I ~E |L8 1 se I Supervision/ Studi and Projec| Projects |Technical Assistance Development/Prootion| Accounting Ad S Services tIdenlficatlon Documentation ge r Collection e |aintenanc Suppi. Services Annex 6 BANQUE RWANDAISE DE DEVELOPPEMENT (BRD) Borrowings as of December 31, 1984 Grace Amount Amount BRD Agreement Amount Maturity Period Interest Commitment Disbursed Outstanding Onlending Lender Date Currency (RwF mil.) 1/ (Years) (Yrs.) (Z p.a.) fee (2 p.a.) (RwF mil.) (RwF mil.) Rate (X p.a.) A. Local Currency Resources BNR 12.12.70 RwF 100.0 30 - - - 88.5 26.8 BRD rates Govt. of Rwanda (Arah League) 3.7.75 RwF 92.8 25 10 3.0 - 92.8 92.8 3RD rates B. Foreigjn Exchange Resources w BNR I (Trust Fund) 1981 - 649.0 9 5 3.5 - 649.0 505.0 8-12j2 Kfw I 2.22.74 DM 16.7 50 10 0.75 - 18.6 18.2 BRD rates KfW II 9.14 76 DH 66.7 50 10 med. term 1.5 - 85.2 85.2 BRD rates long term 4.0 KfN U1t 1.8.81 DK 133.5 50 10 7.0 - 120,3 120.3 BRD rates IDA 1 8.20.76 USS 417.0 variable variable 4.0 - 417.0 101.5 BRD rates IDA 11 9.13.79 USS 521.3 variable variable 6.0 - 460.3 274.3 BRD rates IDA III 7.7.83 SDR 667.6 variable variable 6.9 0.75 86.3 86.3 BRD rates EIB 10.13.83 ECU 52.1 at most 25 at least 2 2.0 - - - BRD rates CCCE 12.31.81 FF 65.4 11 4 6.0 0.5 9% 1/ Converted into RwF using exchange rates of December 31, 1984. - 45 - Annex 7 BANQUE RWANDAISE DE DEVELOPPEMENT (BRD) Historical Operations Summary, 1981-1984 (RwF million) 1981 1982 1983 1984 Approvals Long-Term Loans 418.1 262.7 450.9 608.2 Mediuar-Term Loans 9.0 4.1 27.3 7.7 Equity Investments - - 65.0 - Total 427.1 266.8 543.2 615.9 Commitments Long-Term Loans 959.1 25.8 406.4 438.8 Mediumr-Term Loans 9.0 4.6 11.1 2.8 Equity Investments - - 65.0 - Total 968.1 30.4 482.5 441.6 Disbursements Long-Term Loans 224.9 510.1 553.9 429.4 Medium-Term Loans 87.7 - 4.3 8.1 Equity Investments 20.0 - 69.3 - Total 332.6 510.1 627.5 437.5 - 46 - Ann.x B BAl UI RWANDAISE DE DEVELOPPENNT (3RD) ata-l SSE approvale 1982 / - 1984 tXv millon) Promoter Type of *uminmem Urban Rural Amount Gahidalt Animal huebandry x 2.5 Senyoni Animal huabandry x 0.3 Rangira Hotel trade x 4.0 Tvahirve Garage K 8.0 Nkabur- Hotel x 1.5 Shiramaka Industry x 3.0 Rubengura Animal huebandry x 1.2 Habaruehaka Antml huebandry x 1.2 Ntiruhungwa Welding woriehop x 4.5 hli tkaun Butcher chop x 2.0 Kanu Ga s*tation x 3.0 Kamzutnzc Agriculture x 1.5 Cagina Animl huebandry x 0.8 Gcitngue Animal huebandry x 1.4 Nuligende Animal buebandry x 0.9 Nbonyinmhuti Garage x 6.0 Total 4T.8 1983 Acomr Welding wnrkicbop x 5.5 HakSzinfura Carage x 10.0 Karetrya l%:el x 35.0 Gagico Carpenter' shop x 25.0 Munynmna Dry cleaning x 8.0 Impriparwe Printing ihop x 6.0 Umongtiman Shovel product ion x B.0 Kungahu Hotel x 10.0 Soreverwa Garage a 10.0 Cakoko Animal husbandry x 4.0 iertllmana CarpenteOrm chop x 1.8 Cnchabrtcoru Handicrsft x 1.2 Shiramaka Industry x 1.4 htzmane Gas stecion x 3.0 HahLyambere Agriculture x 0.9 GCacegere Animl hetbandry x 2.5 Mbaguta Animl husbemudry x 1.9 Senyoni Animl huebandry x 1.0 Mkerallgwi Anial huebandry x 2.0 Ntiyamira Handicraft x 2.0 Nzabonlasna Hendieraft x 2.8 KAGINA Animal husbandry x 0.3 ktarehosm Animal huebandry x 2.5 Jumapili Hotel x 18.0 Hotel de NyHnza intal x 18.5 Divera 23 mills x 11.3 Total '9.6 1984 Rudakuhana Animal huobsndry x 2.8 Ilurubone Animal huehandry x 1.8 Rbahukuumba Animal hIumbandry x 9.5 Connya Handicraft x 1.7 Xarihu Handicraft x 3.0 Mugambira Tra.unpr.rt x 3.0 Caeingwa Aiuiml himelundry x 1.7 Shir-eaka tndustry x 0.7 Ndayiaeye Animal huabendry x 2.7 Nkundakozea Agriculture x 2.4 Ecomki Weldinjg hnp x 8.0 Mntililuo Animal hisebmndry x 2.0 Eel iunda Antmal hubamndry x 1.9 Ntiruhewamaboko Animl husabndry x 2.4 Kajeguhakwg Animl huqbendry x 4.0 Hahtyamhpre P. Can iat Inn x 4.5 Ntirubabsltrs Anial hunhundry x 1.2 Catminai Animal hus
Группа Всемирного банка · Staff Appraisal Report
Rwanda - Fourth Banque Rwandaise de Developpement Project
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