Rwanda’s Stock Market to be Automated Soon

Acting Executive Director of CMA, Eric Bundugu

Rwanda’s Capital Market Authority (CMA) has set an ambitious 10-year target to push the country’s stock market to higher levels similar to those in developed markets. The Authority’s top officials say they are determined.

The current market has capitalization of $3.4 billion, the market has Treasury bonds worth Rwf212.5 billion ($251.3 million) and Rwf16 billion ($18.9 million) Treasury bond.

KT Press’ Dan Ngabonziza and Williams Buningwire caught up with Eric Bundugu – Acting Executive Director of Rwanda’s capital market authority for an exclusive conversation on the status of the country’s capital markets.

Below are the excerpts

KT Press: Tell us about Capital Market Authority journey in the last 10 years

Eric Bundugu: The Capital Market is part of the financial sector including banking, micro- finance, and Insurance, pension and capital market sectors. All the other sub -sectors are regulated by the central bank.

The Capital Market started in 2007 when the government felt the importance of establishing the Capital Market. At the time, there was the Capital Market Advisory Council – a body that government put in place to advice on how best to set up the Capital Market. The body had two functions; the regulatory and operations parts. Basically we had trading and the legal part under one house but legally, the two are supposed to operate separately.

As a result, in 2011, the Rwanda Stock Exchange was created as a private company from the Private Sector. Now we have the Capital Market Authority as the regulator. We are now setting up soft and hard infrastructure. Soft infrastructure is setting the legal framework. We have put in place an extensive legal framework made of various laws and regulations. In the regulation we do guidelines under regulations depending on the need in the market.

KT Press: What role does CMA play?

E.B: Capital Market Authority (CMA) protects investors, maintains fair, orderly and efficient market and develops the capital market industry in the country.

KT Press: At the moment what products do you have on offer in the market?

E.B: Currently a number of products on offer are mostly equities and bonds. On equities, 8 companies are listed on the Rwanda Stock Exchange; 4 of them domestic and the rest are cross-listed on the Nairobi Stock Exchange. We also have treasury bonds and corporate bonds. We have also been trying to build capacity of the market intermediaries.

These include the regulatory body, the Stock Exchange, we have some licensees – the people we have given license to do the market intermediary role.

KT Press: Who are these people you mentioned above?

E.B: They include stock brokers, we have investment banks. We also have Rwanda National Investment Trust and Credit rating agencies advisory. We have a list of them.

Capacity was much needed in the industry since the staff had to get training so that they can understand the market, trade and educate Rwandans about the market. A market without investors is not a market. We have been trying to establish hard infrastructure. Currently the trade at Rwanda Stock Exchange is manual but will be automated very soon.

KT Press: How soon?

The project is being undertaken by the Rwanda Stock Exchange; however, for the past two years we have been eager to automate and this will help us in terms of technology.

We also have another infrastructure that is currently handled by the Central Bank called Central Securities Depository (CSD) which holds all details of investors.

The CSD accommodates all securities both equities and debt issued in Rwanda in a book entry form. We will link it with Rwanda Stock Exchange once it is automated.

Another thing we have been trying to do is developing domestic market by looking at how to integrate it with our region. This will help accessing more capital and liquidity. So we have been doing a couple of works in the regional integration. We put in place a legal framework but our peers in Kenya, Uganda and Tanzania have been working on their own legal frameworks.

By being in East African Community, we are trying to sit together and harmonise the legal framework. At the beginning we could not agree on having one instrument that will govern everyone because market dynamics are different and decided to use directives – the instruments that pick the basic content from this legal framework. We have already signed 15 directives that will guide businesses in the region.

KT Press: One of the products you regulate is the Commodities Exchange and there is only one; the East African Commodities Exchange. Are there any others coming?

E.B: That is a recent development for the Capital Market Authority to regulate the Commodities Exchange trading market. This year, a law was passed in parliament giving the Capital Market Authority a mandate to regulate that industry.

We currently have one; the East African Commodities Exchange. They have been trying to set up the market and infrastructure as well. They are working hard with ministries of Trade and Agriculture. The Commodities Exchange is an entire complete ecosystem made by the regulator, market intermediaries and farmers.

One of the recent public education campaign organised by CMA

KT Press: Is the Commodities Exchange enough to satisfy farmers?

E.B: As a regulator, we have a law on commodities that was passed. We are also in the process of getting a law on warehouse seeds system that will help this market to grow. Both laws will play a critical part for the start of this market development.

This Commodities Exchange is now sufficient for the Rwandan market because the concern we are having for the exchange is that it is coming in as a solution to farmers.

Through this Commodities Exchange market, the farmers are not only able to produce but to also have good quality of commodities because the market has a way of degrading their produce this will also help them get access to finance – a major challenge for regional farmers.

KT Press: Let us get back to markets. Do Rwandans really understand this business?

E.B: One of the achievements of the Capital Market Authority has attained is the ‘Investor Education.’ We have been extensively trying to do the investor education awareness. It is the work Capital Market Authority has been doing in partnership with other institutions including the Rwanda Stock Exchange, market intermediaries to help us in investor education. A big chunk of our budget has been put into investor education and we have categorized the targets.

You know Rwanda has a youth-based population, we have been doing the University challenge where we go to Universities and institutions to educate them about Capital Markets.

We do this because these people are professionals and investors of tomorrow. We want to make sure that tomorrow when they start earning income, they should start investing in capital markets.

We conduct presentations in public and private institutions and request them to have a one hour meeting with their staff and teach them about Capital Markets. We also use various communication channels such as Radios and TVs where we do prime talks and open up for questions and answers.

For the bonds, you know they are issued on a quarterly basis. Whenever there is a bond issued, we conduct road shows across the country and reach out to Rwandans at all levels.

The road show involves Capital Market Authority, Rwanda Stock Exchange, the Central Bank, the Ministry of Finance and some of our market intermediaries. This initiative started in 2014 when the government initiated the issuance of bonds. Our main targeted group in these road shows are members of the private sector. As a result, we have since registered a significant on retail investors. Before issuance of treasury bonds started, such treasury bills were consumed by institution investors such as banks and insurance companies.

On Equity, we have seen local people participating in these listed companies. So basically Rwandans have understood what Capital Market is about.

KT Press: What is Capital Market Authority’s roadmap?

E.B: We recently approved a 10-year development strategy. We chose to see the Capital Market as an industry not as an institution. This plan addresses how to develop the market. The plan is going to inform us which product we can introduce in the next three years for example. By introducing new products, you have to go by the market trends.

Rwanda is striving to position itself as a regional hub for foreign investors or a financial hub.

KT Press: Does this mean you dream big to be at the same level with big markets like the London Stock Exchange?

E.B: My answer is yes. We have all it takes to be there. We have government that is providing support and we are very confident about it. We have also a big asset; the low level of corruption in Rwanda. This country also provides safe environment to do business.




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