If the deal goes ahead, Atlas Mara will acquire a 45 per cent stake in Banque Populaire du Rwanda (BPR), on an investment of $22.5m (£14.7m).
BPR has 191 branches and 1,370 staff, with $227m of assets, $155m in loans and $181m in deposits.
The aim is to merge the newly acquired bank with BRD Commercial Bank, another Rwandan lender which it bought last year.
After purchasing more shares, Diamond’s outfit will have a 70 per cent controlling stake of the merged entity.
“This is a very important transaction for Atlas Mara and I am excited by the prospect of our second acquisition in Rwanda,” said chief executive John Vitalo.
“We will be the largest bank by branch locations and the second largest by assets in the country, which is one of sub-Saharan Africa’s most dynamic economies.”
The investment vehicle said the aim is to focus on “under-banked” sectors including small and medium-sized businesses, and farmers.
Former Barclays chief executive Diamond set up Atlas Mara in 2013 in partnership with Ashish Thakkar, raising $325m to invest in African banks.
When he headed Barclays, Diamond grew the UK-based bank’s overseas arms, including major investment across Africa.