Mortgage firm enters Rwandan market, sets eyes on local bank

A new mortgage firm, Westbridge Mortgage, has debuted the local market with investment plans including acquisition of a local bank.

Westbridge Mortgage is a Canadian bank-holding company operating lending institutions in several markets in Africa.

The firm is structured as a Mortgage Real Estate Investment Trust that invests exclusively in mortgages.

This is the first time that Kigali is hosting the African hub of a non-Rwandan financial group.

Senior officials from the lender say that the recently-created Kigali outlet will serve as the holding company for all of its Africa operations through the Kigali International Financial Centre (KIFC).

According to the firm’s Chief Executive JD Diabira, their operations in Rwanda will aim at bringing in a combination of banking expertise in credit risk, inclusive growth and practical outlook.

“It is our goal to see this experience and expertise translate into a healthier banking market in Rwanda, a broader access to better-priced financial products and services for ordinary Rwandans, more innovation as well,” he said.

Diabira said that they are looking to acquire a financial institution, small to mid-sized lender either in retail operations or focused on the wholesale and corporate segments of the banking landscape.

“We are an acquisition-minded institution, and we do have what we would consider a healthy experience acquiring and turning around financial institutions. Typically, small to mid-sized lenders with good management teams in place are what we look for.

They could be retail operations or focused on the wholesale and corporate segments of the banking landscape. We generally want to have full control in terms of shareholding, given the more specialized strategies we look to put in place,” he said.

Why Kigali headquarters?

Kigali as the headquarters for the firm’s operations in Africa was selected after consideration of aspects such as proximity to other markets, adherence to rule of law, growth potential among others, the firm’s officials said.

“As an international entity we considered such elements as proximity to markets, practical adherence to the rule of law, low incidence of corruption, growth potential, and quality of life. And on all accounts Kigali and the KIFC delivered,” he said.

“The holding company setup in Kigali opens up the door to a lot more clarity and simplicity in structure, it introduces efficiency in tax reporting; it greatly facilitates our actual day-to-day operations on the continent. For an international investor, these are key ingredients in generating target returns, including social-impact types of returns,” Diabira said.

The law also ensures compliance for Rwanda as a member of groupings such as Eastern and Southern Africa Anti-Money Laundering Group which have made a commitment to share information and provide assistance to member states on matters relating with cross-border transactions, crimes committed in different jurisdictions and exchange of information.

In recent months, the KIFC has spearheaded reforms of key laws in the country to make the Rwandan economy more attractive to investments.

Ntoudi Mouyelo Strategic Advisor and Coordinator Kigali International Financial Centre said that the recent reforms address key concerns of local and global firms making the ecosystem attractive to investment.

For instance, reforms have seen the introduction of key incentives such as withholding tax at 0 per cent on passive income (dividends, interests, royalties) to facilitate profit repatriation, meaning an investor can expect a return of the entirety of their passive income without any additional tax.

Attractive legal regime

Mouyelo added that with the new company law allowing companies to hold accounts and handle accounting processes in foreign currencies, makes it ideal for the new entrant, Westbridge, to set up a holding company for their Africa operations in Kigali.

“This gives a signal for financial institutions that are looking for consolidation for their treasury in the continent, they may be foreign groups operating in different countries but with their African Hub in Rwanda. The amendments that we have made, very few countries are offering the same,” Mouyelo said.

With Westbridge looking to acquire a local bank, Mouyelo said that it will be important for them to refinance their mortgages which they have incentivized through the investment code whereby firms can set up SPVs (Special-purpose Vehicle) which can be listed on the stock exchange.

The listed SPV’s will be subject to only 5 per cent withholding tax on dividends, an incentive which was previously only for Rwandan and EAC investors.

Mouyelo added that the new entrant will also drive change, growth and transformation of the local mortgage and real estate sector and market which will provide alternative housing finance especially at a time when there is increased demand for homeownership.

With that, the reforms and adjustments he said are not only targeted at foreign investors but also aimed at creating impact in the local market.

The new reforms also have provisions for 3 per cent corporate income tax for investments sourced outside Rwanda enabling foreign structures seeking revenues not only in Rwanda but Africa, to enable consolidation and reduce taxation stress over consolidated income in Rwanda.

Other laws include; law governing companies, as well as the law governing mutual legal assistance in criminal matters.