Executive Master of Business Administration, July 15, 2023

Determinants of the performance of Rwandan banks

NDUWAYEZU Jean Baptiste

Reg:2209000278

LU FENGZHEN Abigail

Reg:2305001582

NIYITEGEKA Jean Eric

Reg: 2305001610

Abstract
This paper examines the metrics and determinants of bank performance, seeks to
determine the importance of metrics in explaining the bank’s performance and give
recommendations for any of the less performing banks located in Rwanda.The study
location was at the University of Kigali.The research and data collected were through
online consulting, participant observation and case studies.

Keywords: Metrics, Bank Performance,Suggestions,Rwanda

 Executive Master of Business Administration, July 15, 2023

Introduction
Definition and background: A bank is a financial institution licensed to receive
deposits and make loans. It may also provide financial services such as wealth
management, currency exchange, and safe deposit boxes. Overall, banks play a vital
role in the economy by mobilizing savings, providing credit, facilitating transactions,
managing risks, and supporting economic activities.
There are several different kinds of banks in Rwanda, including commercial banks
such as Guaranty Trust Bank,Bank of Kigali,I&M Bank,Equity Bank Rwanda
Limited,Ecobank Rwanda,BPRBank, Acess Bank and NCBA Bank,microfinance
banks such as AB Bank and Unguka Bank, development banks such as Development
Bank of Rwanda and cooperative banks such as Zigama CSS and Co-operative Bank
Rwanda.

Bank Performance Criteria and Metrics

When ranking the performance of banks, several criteria can be considered. The
choice of criteria may vary depending on the specific objectives and context of the
analysis. Here are some common criteria used to rank bank performance:
1. Profitability: This criterion assesses the bank's ability to generate profits. Key
metrics to consider include Return on Assets (ROA), Return on Equity (ROE), Net
Interest Margin (NIM), and operating income.
2. Asset Quality: The quality of a bank's loan portfolio is crucial. Non-Performing
Loan (NPL) ratio, credit risk metrics, and loan loss provisions are indicators to
evaluate asset quality.
3. Liquidity: Liquidity measures a bank's ability to meet short-term obligations.
Criteria to consider include Loan-to-Deposit Ratio (LDR), Cash Reserve Ratio
(CRR), and the availability of liquid assets.
 Executive Master of Business Administration, July 15, 2023
4. Capital Adequacy: Capital Adequacy Ratio (CAR) is a measure of a bank's capital
strength and its ability to absorb losses. Higher capital adequacy provides a cushion
against financial distress.
5. Efficiency: Efficiency metrics assess how well a bank utilizes its resources to
generate revenue. Key indicators include Cost-to-Income Ratio (CIR), Operating
Expense Ratio, and cost efficiency in various business lines.
6. Growth: Growth criteria consider the expansion of a bank's operations over time,
such as growth in deposits, loans, customer base, branch network, and market share.
7. Risk Management: Effective risk management practices are vital for a bank's
stability. Consider criteria such as risk-adjusted return, risk management policies,
governance frameworks, and compliance with regulatory requirements.
8. Customer Satisfaction: Customer-centric criteria include customer satisfaction
surveys, feedback mechanisms, customer retention rates, and reputation in the market.
9. Innovation: Innovation and technology adoption play an important role in a bank's
competitiveness. Consider the bank's investment in digital banking solutions,
innovative products/services, and adoption of emerging technologies.
10. Social and Environmental Responsibility: Assessing a bank's commitment to
social and environmental sustainability can be relevant for certain stakeholders.
Consider criteria such as environmental impact, social initiatives, corporate
governance, and ethical practices.
 Executive Master of Business Administration, July 15, 2023
Metrics Profitability Asset Quality
Banks (Rwf Billion) (Rwf Billion)

Guaranty Trust Bank 34.98 146.53

Bank of Kigali 59.7 1755.6
Cogebanque Bank 9.05 29.38
Equity Bank 24.22 66.24
Ecobank 22.39 25.17
BPR Bank 14.28 72.15
AB Bank 8.71 15.4
Development Bank of Rwanda 1.33 73.84
Source:Financial Report of Banks in Rwanda in 31/12/2022

Note: The above charts use two key elements which are profitability and asset quality
to indicate the bank performance in Rwanda in 2022.
 Executive Master of Business Administration, July 15, 2023

Conclusion and Suggestions

Based on the provided metrics of profitability and asset quality for banks in Rwanda,
Bank of Kigali demonstrates relatively higher profitability and a significantly larger
asset size, indicating a stronger performance compared to some other banks on the
list.Guaranty Trust Bank appears to have moderate profitability and asset size
compared to some other banks on the list.AB Bank demonstrates lowest profitability
and smallest asset size compared to some other banks on the list.
For AB Bank, it should improve profitability by analyzing cost structures and
identifying areas for expense reduction or revenue enhancement,enhance asset quality
by implementing effective risk management practices and proactive credit monitoring.
For Development Bank of Rwanda,it should develop strategies to improve
profitability by diversifying revenue sources and exploring new lending opportunities,
enhance asset quality by implementing robust risk management practices and
conducting thorough due diligence on loan applications.
It's important to note that this analysis is based only on the provided profitability and
asset quality metrics. A comprehensive evaluation of bank performance would require
additional metrics and a more detailed assessment.
 Executive Master of Business Administration, July 15, 2023

References
Aliata, V. L., Odondo, A. J., Aila, F. O., Ojera, P. B., Abong’o, B. E., & Odera, O.
(2012). Influence of promotional strategies on banks
performance. International Journal of Business, Humanities and Technology, 2(5),
169-178.
Influence of Promotional Strategies on Banks Performance Victor Lusala Aliata
Department of Marketing and Management Maseno University Maseno, Kenya
Rwanda bank financial report 2022
Executive Master of Business Administration, July 15, 2023