The last two decades have seen a growth in financial hubs across Africa and beyond. According to the Global Financial Centres Index report, published by the Z/Yen Group, the City of London’s commercial think-tank, over 10 financial centers have been established in key continents across the world since 2007, with the largest number recorded in Asia Pacific, Middle East, and Africa.
The rise has been largely attributed to the increasing flow of foreign direct investments, fostering a need for hubs to serve as conduits of capital. Similarly, the rise of financial centers has also attracted international capital at scale to the continents, as well as a growing number of financial firms and technically skilled professionals.
The 32nd edition of the Global Financial Centres Index was published on the 22nd of September 2022, ranking and measuring the competitiveness of 119 international financial centers globally.
This was done, through a survey conducted on 11,000 international professionals as well as a quantitative review of a set of sub-indices that measure the competitiveness of financial centers across five key indicators including; financial sector development, human capital, business environment, infrastructure, and reputation of the city.
During the Index’ launch event, the Chairman of the Z/Yen Group highlighted the importance of financial centers and well-functioning financial markets in stimulating investment into a country’s real economy, funding Trade, Infrastructure, ICT and other key industries.
South Korea was highlighted as an exemplary country that transformed itself from an isolated rural country to a regional trading hub in the East with a vibrant financial center.
Similarly, the rise of San Francisco as a financial center has demonstrated the increasing importance of innovation for the success of financial centers.
Rwanda has recently joined the fold, with the establishment of The Kigali International Financial Centre, also known as, KIFC. This is Rwanda’s financial centre facilitating international investment and cross-border transactions in Africa.
KIFC is set to position Rwanda as a preferred financial jurisdiction for investments into Africa by providing an attractive destination for investors, with a legal and regulatory framework fully compliant with international best practices.
Kigali International Financial Centre, currently ranks 5th across Africa in the Global Financial Centres Index, and is rated amongst the 15 financial centres expected to become more significant globally over the next 5 years.
Kigali has also been observed to be an international specialist center building on its niche for international connectivity, and providing a highly targeted product offering for investors and FinTech companies.
This is testament to the robust financial reforms that the Government has since introduced, to facilitate local and international investors with fund domiciliation and consolidation of assets through Rwanda.
Rwanda’s vision to become a high income knowledge economy is one of the key drivers behind the establishment of the financial center, alongside the country’s regional positioning. With key initiatives focusing on innovation through Kigali Innovation City, trade through AfCFTA, tourism through the Visit Rwanda brand, sustainability through e-mobility, and the City of Kigali Masterplan to name a few, Rwanda is charting a path for national and regional transformation, increasing FDI flow into the country, while also becoming a regional financial hub.
Rwanda is not alone in this endeavor however, with Nairobi and Lagos also recently establishing their own financial centres to serve both national and regional ambitions.
The rise of more financial centers across the continent is therefore expected in the future and will contribute greatly to serving Africa’s projected fast growing population and financing needs.
The success of a financial centre ultimately rests in its ability to increase and stimulate investment into the economy, and financial centers do not operate in isolation - requiring well established and functioning physical and ICT infrastructure, predictable and compliant legal and dispute resolution systems, competitive and fair tax policies, regional collaboration and trade integration, amongst other enablers.
This is what the Kigali International Financial Centre will be measured against. Thus, Rwanda will need to make a concerted effort to ensure continued growth and advancement in other key sectors/industries to complement this ambition.
Hortense Mudenge is the Chief Operations Officer, Rwanda Finance while Laura Bierer is an Advisor at the Tony Blair Institute.