Rwanda’s financial sector expanded strongly in the first quarter even as the escalating Middle East conflict heightened risks to banks, insurers and payment systems through higher fuel prices, trade disruption and financial market volatility, according to the country’s central bank governor.
National Bank of Rwanda Governor Soraya Hakuziyaremye said the country’s financial system remained “sound, resilient and well-capitalized,” with total sector assets rising 22 percent year-on-year to Rwf16.5 trillion in the first three months of 2026.
The assessment comes as policymakers monitor the spillover effects of the Iran-linked Middle East conflict, which has driven sharp increases in global oil prices and intensified concerns over inflation, asset quality deterioration and operational risks across financial institutions.
“The main impact would be through the disruption of oil and commodity supply,” Hakuziyaremye told reporters in Kigali. “If the conflicts persist, pressures could become more broad-based, leading to deterioration in asset quality across banks, as well as potentially some banks being undercapitalized if loan losses were to increase.”
The banking sector, Rwanda’s largest financial subsector, recorded 20 percent asset growth during the quarter, while microfinance institutions expanded assets by 26 percent. Pension fund assets rose 35 percent and the insurance industry grew 10 percent, pushing total financial sector assets to 67.8 percent of gross domestic product from 65.6 percent a year earlier.
Credit growth remained robust, with outstanding loans across banks, microfinance institutions and non-deposit-taking lenders increasing 27.7 percent. Construction accounted for the largest share of lending at 18.7 percent, followed by households and individuals at 15.9 percent and trade at 15.7 percent.
The governor also highlighted a gradual increase in financing to agriculture, where loans now account for 3.9 percent of outstanding credit compared with a historical average of about 2 percent, reflecting efforts to channel more financing into productive sectors of the economy.
“We also observed as a quality an increase in loans going to agriculture,” Hakuziyaremye said. “It’s still not sufficient, but it’s an ongoing trend that we appreciated as a committee.”
The Financial Stability Committee said banks and microfinance institutions continued to maintain strong balance sheets despite rising global uncertainty. Non-performing loans stood at 3.2 percent in banks and 2.4 percent in microfinance institutions, both below the regulator’s 5 percent prudential threshold.
However, stress remained elevated among non-deposit-taking financial institutions, where bad loans stood at 12.6 percent, even though the ratio had declined from a year earlier. The central bank cited weaknesses in risk management, loan recovery systems and borrower financial literacy among lending companies.
Capital buffers also remained well above regulatory minimums. Banks posted a capital adequacy ratio of 22.4 percent, while microfinance institutions stood at 34.8 percent, both exceeding the required 15 percent threshold.
Liquidity levels were similarly strong, with banks recording a liquidity coverage ratio of 318 percent while microfinance institutions posted 85 percent, comfortably above the minimum 30 percent requirement.
Profitability across the sector remained resilient, supported by strong credit expansion and investment income. Return on equity reached 19.9 percent for banks and 23 percent for microfinance institutions.
The insurance sector also reported improved underwriting performance during the first quarter. Claims ratios declined to 16.5 percent, while expense ratios eased to 31.3 percent, helping improve the combined ratio to 91.8 percent, below the regulator’s maximum threshold of 100 percent.
Insurance firms’ solvency ratio rose to 204 percent from 199 percent a year earlier, while return on equity remained strong at 18.5 percent.
“This shows that underwriting performance of insurance companies is strong and improving,” Hakuziyaremye said.
Rwanda’s pension industry continued to expand rapidly, driven by rising contributions to both public and private schemes. Public pension contributions increased 76.4 percent, while private pension contributions rose 4 percent. Contributions to Ejo Heza, the government-backed long-term savings scheme, climbed 23.7 percent.
Digital payments also accelerated sharply as Rwanda continued its push toward a cash-lite economy. The value of electronic payments reached Rwf21.6 trillion between January and March, up from Rwf17.4 trillion in the same period last year.
Electronic payment volumes rose to the equivalent of 347 percent of GDP during the quarter, underscoring the growing importance of digital financial services in the economy.
The central bank’s Rwanda Integrated Payment Processing System maintained operational availability of 99.7 percent, while the national retail payment system, eKash, posted 99.9 percent uptime. Electronic money issuers maintained 99.7 percent availability.
The value of eKash transactions increased to Rwf27.7 billion in the first quarter as adoption continued to rise.
Still, the rapid expansion of digital finance has also amplified cyber and operational risks. Fraud cases declined to 2,675 in the first quarter from 4,367 a year earlier, though the value of fraud incidents increased, highlighting growing exposure for financial institutions.
“Operational risks, especially frauds, remain a challenge,” Hakuziyaremye said. “We continue to monitor closely cyber and operational risks as a key focus area.”
The central bank also pointed to early benefits from the consolidation of Umurenge SACCOs into district-level cooperative banks, a reform aimed at strengthening Rwanda’s community banking system.
Interest rates on agricultural loans at district SACCOs fell to 14 percent from 24 percent before consolidation, while business loan rates declined to 18 percent from 19 percent. Mortgage lending rates also dropped to 17 percent from 20 percent.
According to the Financial Stability Committee, the consolidation has strengthened governance, improved risk management, enhanced operational efficiency and enabled adoption of core banking systems capable of real-time operations.
Despite the strong performance, policymakers warned that prolonged geopolitical shocks could pressure capital buffers, weaken asset quality and expose vulnerabilities in concentrated lending portfolios.
“As a financial regulator, we are conducting stress testing to ensure that every bank, insurance and microfinance institution has enough capital even in the face of adverse scenarios,” Hakuziyaremye said.
