As part of efforts to further boost the capacity of the local financial system, Central Bank has said that the capital markets is set for further deepening during the course of the fiscal year 2010.
The Governor of Central Bank François Kanimba said recently that the regulatory and institutional deepening programmes are meant to form the basis of the changes meant to boost the operations of the local capital markets.
”First of all the legal framework is being worked on. The law establishing a capital markets authority is set for enactment before June this year”, Kanimba told Business Times.
The Governor added that the second part of the broad deepening programmes is centred on the diversification of financial instruments in the market apart from the very few government bonds or cross listing of stocks.
”Once undertaken the deepening will be able to create a vibrant capital market,” he added.
Central Bank says that as part of the new measures it has embarked on a new move meant to create different government bonds which will be able to attract different maturity profiles.
According to officials this will serve to create some diversification within the bond market. The deepening process will entail assisting the Capital Markets Advisory Authority (CMAC) to shape the yield curves from the money markets to the bond markets.
”When we manage our daily monetary policy we try to establish a clear link with the medium to longer capital markets by creating reasonable yield curve depending on the maturity of different financial instruments .
It means that we are creating a benchmark to enable additional activities such as private listings to be actualized,” Kanimba said.
So far the bond market has attracted three government bonds worth Rwf 16.75 billion while a corporate bond from BCR worth Rwf 1 billion was issued.
The new moves comes in the backdrop of the eagerly awaited listing of the first Initial Public Offer (IPO) from Rwanda’s beverage manufacturer Bralirwa as part of the listing of local stocks.
Apart from the cross listing of KCB shares last June, the government has decided to sell shares via its privatization programme in a number of companies where it holds shares. This is set to boost activities on the capital markets.
“I do believe that we can do more. For instance CMAC is working on a project to establish a local unit trust before the end of the year. This is a vehicle in which people can invest in small savings through a fund which can invest in some of these financial instruments,” Kanimba said.
Central Bank added that part of the deepening entails undertaking further reforms within the pension sector.
”Thise new legal environment will encourage big companies to establish independent and private pension schemes for their staff. These in turn will create further opportunities for longer term savings for people who have the capacity,” Kanimba said.