Lease Financing and performance of banks in Rwanda: a case of Rwanda Development Bank, in Rwanda (2007-2010)
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Date
2012
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Publisher
Kampala International University(KIU), College of Economics and Management
Abstract
The research entitled "Lease financing and performance of banks in Rwanda" with case study of ROB located in Kigali. The main problems caused by leasing are increase of non
performing laons and bad debts due to no payment or delayed payment of rentals and tax
burden. Leasing is specialized business which requires qualified and experienced people.
Persons constituting its top management should have expertise in accounting, finance,
legal and decision areas. The objectives of the study were to identify lease financing facilities, to analyze the contribution of lease and to find out the gaps hindering the banks leasing objectives. In the research methodology, the study employed a Simple Random Sampling. A sample
size of 30 respondents was chosen from Rwanda Development Bank considered as case study. The findings of the study reveal the lease financing equipment include vehicles, office equipments, agricultural equipments and software equipments. Lease financing expands
business sector, helps getting finances without guarantee, is of low risk compared to normal loans, it has the advantage of lowdown payment, the lessee incurs minimum capital outlay required. The various obstacles hindering the bank to achieve lease financing business objectives were identified. They include the low market awareness,
default payment by lessees leading to non performing loans, lack of care of the leased asset, return of asset before maturity, delay of return of asset before maturity etc. Using the lease financing facilities, together with the measures to remove obstacles to achieve leasing objectives and the Government policy to strengthen the banking sector,
and enhance the resilience of the financial system. The objectives will be achieved and leasing investment in Rwanda will be successful.
Among the the recommendations, the research recommended that BRD should establish the leasing department. BRD should reinforce, BRD should establish clear policy of recovery regarding the funds invested in leasing contracts. BRD should train professional staff and the government should prepare accounting guidance for leasing and establish the
lease law specifying duties and responsibilities for both the lessor and lessees.
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Keywords
Banking Services, Finance, Leasing Finance, Rwanda