The districts will be able to refund the money on monthly basis from various revenue streams.
The Ministry of Finance and Economic Planning is looking into prospects of introducing municipal bonds in the local market to enable districts to raise capital and necessary investment for infrastructure projects.
Municipal bonds are debt securities issued by states, cities and other governmental entities to raise money to finance long-term projects for the public good.
This will see the general public able to lend money to a district that can be repaid with interest over a period of time after which the original investment will be returned to the lender on maturity of the bond.
The move to introduce municipal bonds is one of several interventions being explored by government to broaden sources of infrastructure funding, Amina Rwakunda the Chief Economist at the Ministry of Finance said at the recent Rwanda Economic Update by the World Bank.
A recent World Bank report noted the need for Rwanda to significantly mobilise private sector investments in infrastructure to meet development goals in the medium and long term.
Rwakunda said that in response to the challenges cited in limited capital for infrastructure investment, the Ministry of Finance is also looking at reducing the risk perception in infrastructure investment.
She said that the process will include working with the various district administrations to ensure that their financials can prove their creditworthiness.
"We are looking at infrastructure bonds and at district level how we can do municipal bonds through the capital market. We have to take the district administrations through a process to check their financials, have them rated on creditworthiness and make them ready to partner with the private sector," she said.
Rwanda in 2014 established guidelines and regulations for Municipalities on how to raise funds through the issuance of municipal bonds.
The guidelines noted that the bonds could be used to mobilise investment for projects such as water supply, sewerage or sanitation, drainage, solid waste management, housing, roads and urban transport among others.
District authorities would pay back the interest from revenues generated monthly through the various streams such as rental income tax, immovable property tax, trade licenses and market fees among others.
The idea of municipal bonds has previously been floated by the government with experts noting that the various districts authorities need to undergo assessment and rating as well as have standard books of accounts.
This would also require the authorities to ensure prudent resource management, project execution and efficiency.
The introduction of municipal bonds is ideal in that it allows members of the public to invest their savings in low-risk bonds. This will serve to improve savings culture and investment in infrastructure.
Going by the trends of oversubscription of the quarterly Treasury bonds, municipal bonds could be popular in the local market. Government Bonds have an over 10 per cent per annum coupon repayment.
Experts say that given the availability of savings, the question has been how to ensure that the holders of the capital can find it attractive enough to invest it in Infrastructure.
Allen Dennis, a Senior Economist with the Development Economics Prospects Group said that key factors that inform the public confidence to invest savings include regulatory ecosystem, availability of public-private partnership framework as well as institutions that can spearhead the process.