The South African financial rating agency, Global Credit Rating (GCR), announced Wednesday, May 26, to have lowered the risk score of the financial institutions sector for Rwanda from “4.00” to “3.75 “.
The South African giant stressed that the new score balances the weakening of the government’s fiscal position with rising levels of non-performance in the banking sector. This is because the public debt-to-GDP ratio is expected to increase to 80% by the end of 2022 from 71% in 2020.
“We consider the sector to be somewhat overbought given the size of the economy, noting that the upper level of the sector is controlled by a few players but that regional banks are increasingly competitive in the country,” noted the agency.
As a reminder, the risk score of the financial institutions sector (ranging from 0 to 15) is a key factor in the score of the operational environment component. The heart of the GCR rating framework is based on GCR’s view that an entity’s operating environment largely governs its solvency.