Rwanda is the best investment destination for banks looking for regional expansion, according to a research by Standard Investment Bank.
The country ranks highly in terms of asset growth, profit after tax, cost to income ration and growth of its growth domestic product compared to other markets in east Africa.
SIB found that Rwanda scored 46 points to beat Tanzania by 14points and Kenya by 7 points.
In 2011, Rwanda had 2.03million deposit accounts with only 209 000 issued debit cards up from 41 000 in 2010. The volume of debit card Africa transactions jumped from 0.4millon in 2010 to over 2m in 2011) showing the potential for growth in the country.
“The growing influence of regional operations is one of key drivers likely to shape the fortunes of the banking sector over the next decade,” reads SIB findings.
Kenyan banks have been leading the foray into the East African region, with minimal expansion by indigenous Tanzania, Uganda and Rwanda banks .
Kenya Commercial , Diamond Trust , Commercial Bank Africa, Fina, Equity , I & M , Imperial , ABC, NIC , CFC Stanbic & Co-operative banks operate a total of 179 branches outside Kenya.
“Based on our test results we therefore conclude, expected returns from different regional markets vary, therefore management should make a conscious decision on which markets to operate in,” said the report.
Uganda remains the most preferred destination for Kenyan banks with 85 branches there with South Sudan being the other favourite market.
Of all non-Kenyan operations for both KCB and Equity in the 2010/2011 financial year Sudan yielded their highest profits.
SIB analysts said banks are also grappling with the mode of entry to the other regional markets – green field or acquisition.