Islamic finance could unlock new capital for Rwanda’s market

Rwanda’s move to introduce Islamic capital market products could open a new financing window for infrastructure, housing, agriculture, private sector growth, and sustainable development, as the country seeks to deepen its capital market and attract a wider pool of investors. Market players say the planned introduction of Sharia-compliant products, including Sukuk, comes at a time when Rwanda is looking to diversify investment instruments beyond the conventional products currently available on the local bourse. Sukuk, often referred to as Islamic bonds, differ from conventional bonds because they are not based on interest payments. Instead, they are structured around ownership or participation in an underlying asset, project, or investment activity. This makes them attractive to investors who prefer ethical or Sharia-compliant financing, while also offering issuers another avenue to raise long-term capital. Celestin Rwabukumba, the Chief Executive Officer of the Rwanda Stock Exchange, said the capital market is built around issuers seeking long-term finance, investors looking for opportunities, and intermediaries who help structure products and bring both sides together. The new products, he said, will serve companies that want to raise capital in a Sharia-compliant manner, as well as investors who do not want to put their money in products that do not meet their ethical or religious requirements. Rwabukumba said the initiative is also about financial inclusion, because some investors have stayed away from the market simply because existing products did not respond to their beliefs or preferences. “The market has products which are plain vanilla,” he said, referring to ordinary capital market instruments. “So now it is an additional diversification of investment opportunities for investors, but also an opportunity for issuers to tap into those investors who would not have come to the market.” He added that Rwanda should position itself to attract global capital that is looking for credible destinations on the African continent, especially at a time when investors from regions such as the Middle East are seeking new opportunities. According to Rwabukumba, Rwanda needs capital to finance infrastructure and support the expansion of local businesses, and Islamic finance could become one of the tools to mobilise that capital. Issa Mohammed Ahmed, a consultant in Islamic market products who facilitated the workshop, said the listing and trading rules being developed are critical because they will determine how Islamic capital market products are issued, listed, traded, and accessed by investors. He said such rules are important in building liquidity in the secondary market, which is key to attracting both domestic and international issuers. Ahmed noted that Islamic capital market products are not exclusively for Muslims, adding that one of the misconceptions around Islamic finance is that it only targets the Muslim community. Another misconception, he said, is that Islamic finance is only about profit-sharing, yet there are several instruments that can be structured under the model. He said Rwanda and the region had taken a long time to embrace Islamic capital markets compared to countries such as Malaysia and Nigeria, but added that Rwanda’s regulatory approach showed ambition and innovation. “There is a lot of capital in other parts of the world,” he said, pointing to the Middle East as one of the markets that could be attracted to Rwanda if the right instruments are created. Ahmed said more public awareness and capacity building will be needed, especially among regulators, government officials, issuers, intermediaries, and investors, to close the knowledge gap and address misconceptions, including the fear that Islamic finance is about “Islamising” the community. He added that Rwanda should look ahead to the possibility of issuing a sovereign Sukuk, as countries such as the United Kingdom, South Africa, and Luxembourg have done. Charlotte Helminger, Chargé d’Affaires at the Embassy of Luxembourg in Rwanda, said creating a framework for Islamic sustainable finance could help Rwanda unlock new investment opportunities, attract a broader investor base, mobilise long-term capital, strengthen financial inclusion, and deepen the capital market. She said Luxembourg’s experience in sustainable and Islamic finance, including through the Luxembourg Green Exchange and its role as a European hub for Sukuk and Sharia-compliant finance, offers lessons for Rwanda as it positions itself as a regional centre for sustainable and innovative finance. Helminger commended the Rwanda Stock Exchange, the Capital Markets Authority, and partners involved in developing the draft rules, saying the work reflects Rwanda’s ambition to build a more diversified, inclusive, and internationally connected capital market. She said Islamic finance is one of the fastest-growing segments of global finance and can support capital mobilisation for infrastructure, housing, agriculture, private sector development, and sustainable development. For market intermediaries, the new framework presents both an opportunity and a responsibility. Olivier Muneza, the Chief Executive Officer of Mo Capital, a stock brokerage firm, said the discussion showed that Sukuk and other Islamic finance products could give businesses alternatives to bank loans and conventional bonds. He said the products could help market players tap into new investors who follow Sukuk financing models, but added that regulators and market institutions will need to continue awareness campaigns targeting issuers and businesses. Vanessa Deborah Uwingabire, a stockbroker at Baraka Capital Ltd, said the introduction of Islamic capital market products would broaden Rwanda’s market and strengthen competition in a positive way. She said many people initially assume that Islamic capital markets are only meant for the Muslim community, but the discussions helped change that perception. For Rwanda, the opportunity now lies in translating the rules into real products that can attract issuers and investors. If well implemented, Islamic finance could become more than an alternative investment window. It could be a practical tool to mobilise long-term capital, deepen the capital market, and support the country’s broader economic transformation.

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Islamic finance could unlock new capital for Rwanda’s market