The development of mining sector is weakened by Commercial Bank reluctance to extend credit facility.
The reluctance is mainly caused by the high inherent risk and the uncertainties on mining projects leading to the facility defaults.
Mr. Evode Imena, the Minister of State for Mining of Rwanda said, “Rwanda is mulling over the establishment of a credit guarantee fund to encourage commercial banks to increase lending to the mining sector, the envisaged guarantee fund will cushion banks against this risk, thus encourage funding to the sector.”
“Growth of the mining sector is being held back by access to finance challenges. We believe a credit guarantee fund is likely to see banks increase lending to the sector,” Imena elaborated.
The concept is in review by the Ministry of Finance and Economic Planning and will be assisted by the World Bank and is expected to start with initial capital of $40 million.
The fund will be used as the cushion to the commercial banks in case of the default from customers; this fund will be used to compensate part of the loss incurred.