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Capital Market Development


A capital market is a place in which financial securities are traded by individuals and institutions/organizations. It can be a primary market where initial public offers (IPOs) take place or a secondary market where IPOs are traded subsequently.

Rwanda’s capital market was established in 2011 under the Capital Market Act of 2011, to guide in the development of capital markets. Prior to the establishment of CMA, the Rwanda Capital Market Advisory Council had been established in 2007 to develop the Capital Market in Rwanda, facilitate the trading of debt and equity securities and enable securities transactions, as well as perform regulatory functions over the Rwanda Securities Exchange (RSE).

Players in capital markets can be divided into investors, issuers and intermediaries. The market intermediaries in Rwanda include the Rwanda Stock Exchange, licensed brokers, dealers, and sponsors. The regulator is the Capital Markets Authority.

The law defines capital market instruments as any assets and interest generated by the following instruments: shares, instruments creating or acknowledging indebtedness, Government-owned capital market instruments and certificates representing capital market instruments.


Benefits of investing through the capital market

The following benefits apply both to the primary and secondary markets:

a) Access capital: By issuing shares or debt directly to the public through the RSE private sector businesses and government can raise funds for expansion of existing business or new projects.

b) Discover the value of its business: By listing on the RSE issuers or owners of business are able to discover the price of their securities and therefore the value of their business. This enables them to realize the market worth of their wealth.

c) Raise a company’s visibility and enhance its status with customers and suppliers at home and overseas: A listing on the capital market raises the profile of a company through continuous media coverage. This is free publicity and enhances the product presence of the issuer among its customers.

d) Have better bargaining position with financiers: Increased capitalization of an issuer over time enables the issuer to raise capital at a lower cost due to their improved rating in the market.

e) Enhance management practices: The capital market requires a minimum level of disclosure and corporate Governance and this encourages the quality of management practices.

As per Financial Sector Development Program II (FSDPII), the capital markets legal foundation was virtually completed when the laws and regulations were put in place. Creating a government bond market and yield curve was an important element of capital market development. Therefore government established a regular bond issuance program. The three elements of bond market development was to introduce regular government bond issuances to build a yield curve, broadening the investor base through the growth of contractual savings such as pensions, and promoting private sector bond issuance.


Government Bond

A Treasury Bond/Government bond is a debt instrument issued by a national government through the Central Bank in its capacity of Government agent, generally with a promise to pay periodic interest payments and to repay the face value on the maturity date.


The terms on which a Government can sell bonds depend on how creditworthy the market considers it to be. Government bonds are usually denominated in the country's own currency. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bonds, although the term "sovereign bond" may also refer to bonds issued in a country's own currency.

In a bid to develop the Rwandan bond market, the Government of Rwanda in collaboration with BNR has published its quarterly bond issuance program in February 2014. In this context a 3 year Treasury bond with a face value of FRW 12.5 billion was successfully issued in February 2014.

The intensive mobilization across the country and within the region has increased the participation of individuals, pension and insurance companies, microfinance institutions and regional investors. The transaction was oversubscribed by 140% recorded in 56 applications in contrast of less than 15 bids recorded in average per auction in previous years.

Recently, the Government’s issuance of  Rwf 15 billion bond on 27th August 2014 has been successful with Rwf 34.8 billion as the total amount booked representing a subscription level of 232 percent, the highest ever oversubscription recorded by any Rwandan government bond.  The National Bank of Rwanda received 91 bids from different categories of investors compared to 56 in the previous issuance. Retail investors increased to 39 from 29 recorded in February this year. The awareness campaigns were organized in a bid of bringing on board more institutional investors both local and international.

The Treasury Bonds’ maturity period is likely 3, 5, 10, 15 years and more.




Rwanda’s Eurobond


Kigali Convention Center Project financed by EUROBOND

Eurobonds are bonds issued/traded in a country using a currency other than the one in which the bond is operating. This means that the bond uses a certain currency, but operates outside the jurisdiction of the central bank that issues that currency. This means that, had Rwanda for example issued Rwandan francs bonds on the Nairobi securities exchange (NSE) it would still be a Eurobond. It is therefore, important to note that the term Eurobond has nothing to do with Euro.

On April 25, 2013, Rwanda’s debut 10-year Eurobond went to market with a coupon of 6.625% and an order book of $3.5 billion. The yield was tighter than expected and eight-and-a-half times oversubscribed. The Rwanda government used $120 million of the proceeds on repaying an outstanding loan on the Kigali Conventional Centre, as well as $150 million is financing the completion of the Kigali Convention Centre, another $50 million was earmarked for funding the completion of Nyabarongo hydropower project expected to generate over 28 MW by the end of 2015 and $80 million on retiring RwandAir’s debts.


Rwanda’s Eurobond was named “Deal of the Year” by pre-eminent international finance magazine Euro money. The lead managers on the deal were BNP Paribas and Citi.



Leveraging Capital Markets for SME financing in Rwanda

This study reviews and examines the current legal and regulatory framework to establish the extent to which it facilitates private sector access to capital markets in Rwanda; available literature and data on private sector access to capital markets in Rwanda; and available evidence on what has worked in other countries in Africa and globally including in Asia, Brazil and Israel to provide lessons for Rwanda.


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