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Rwanda: Capital Market to Become More Attractive
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Focus Media (Kigali)
28 May 2008
Posted to the web 29 May 2008
Sam Ruburika
Four months after the launch of the capital market, the capital market advisory committee (CMAC) is looking for a consultant to come up with a legal and regulatory frame work which will facilitate the smooth operation of capital markets in Rwanda.
CMAC operations manager, Pierre Celestin Rwamakuba explains that CMAC was established by the Prime Minister's decree in March last year, and has until now been operating on a blue print developed as a temporary operational framework.
However, specific laws and regulations need to be elaborated, as well as a capital market act and collective investment scheme which would help the smooth operation of the capital markets in Rwanda.
"When we began, we were using our blue print which included aspects such as a members' code of conduct, listing requirements and trade regulations," he says.
According to him, it is not unusual to start capital market trading without the full legal framework in place. In fact, he says, even the world's biggest capital markets and stock exchanges began in an informal way.
"The London stock exchange, for instance, was initially located in a coffee shop where two people met over coffee and scribbled messages to those interested in buying shares in a certain company and left the message with the waiter, who in turn would deliver it to the person interested," Rwamakuba recounts.
He also remarks that the capital market should have started in 2005, yet since it was part of the wider Financial Sector Development Plan (FSDP) which was being elaborated by the National Bank, they had to wait for this plan to be completed.
As for the role of CMAC, he explains that it acts as the regulator as well as the capital operator, and that its board comprises both the private sector and the government.
Concerning the task of the consultants, the operations manager says that they are supposed to come up with a more comprehensive legal frame work that would incorporate aspects such as the new company act which is currently in parliament.
"The consultant must refer to the blue print to design the new legal frame work," Rwamakuba says, adding that until now CMAC did not have a capital market act or security laws which are vital if more players are to join the Rwandan capital market.
Therefore, the consultant has to come up with a framework that facilitates smooth operations thus allowing more players in the capital market.
Currently there are three bonds offered at the capital market, where the government has two bonds, one of Frw15.2 billion with an 8% interest over two years and a second worth Frw 14.2 billion with an interest rate of 8.25% over three years.
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The only corporate bond available is from BCR worth Frw 1 billion with an interest rate of 9% which runs for three years.
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