Momentum is building towards realising full development of the much-anticipated Kigali International Financial Centre (KIFC), an initiative by the Government that seeks to position Rwanda as a business and financial hub in Africa.
A new company, Rwanda Finance Ltd, has been created to spearhead the development of KIFC and a chief executive officer was appointed. Several financial players have already bought into the idea.
In 2017, the Government approved the establishment of the KFIC. The blueprint would basically position Rwanda as home for nationally or internationally significant financial service providers, enabling the country to handle finances for others.
They will include banks, investment managers, hedge-funds or stock exchanges, among others.
Kigali International Financial Centre (KIFC) is an initiative by the Government that seeks to position Rwanda as a business and financial hub in Africa. File.
The blueprint seeks to facilitate the country to attract a concentration of participants in banking, asset management, insurance or financial markets with venues and supporting services for these activities to take place.
Currently, cities like New York, London, Hong Kong, Singapore and Shanghai are ranked the world’s top financial centres. The most recent ratings by the Global Financial Centers Index (GFCI) show those cities providing competitive environment for investors to do business.
According to GFCI, all the top five cities have an advanced system of payment for goods and services which make commerce and trade very convenient, and investors are assured of returns due to stable assets management policies.
London and New York have interchangeably held the top position due to the high quality of mergers, investment opportunities and high credit rating of their stocks listed companies.
London is home to the Bank of England (BoE), one of the most prestigious and oldest central banks in the world. The London Stock Exchange (LSE) is among the world’s top five stock exchanges, and the city has one of the world’s largest banking sectors.
New York, on the other hand, is known for Wall Street whose reputation is synonymous with finance. It is home to two of the world’s largest stock exchanges— the New York Stock Exchange (NYSE) and the NASDAQ, and some of the world’s largest banks have their headquarters there — JP Morgan Chase & Co. and Citigroup Inc.
But there are other known highly ranked financial centres like Tokyo in Japan, Toronto in Canada, Zurich in Switzerland, Beijing in China and Frankfurt in Germany.
While Rwanda may not be at the level of the rest of the players, yet, the country seeks to stand out in the region where only Casablanca, Mauritius and Johannesburg always stand out as the financial hubs.
Celestin Rwabukumba, the Chief Executive at Rwanda Stock Exchange sees more benefits if Rwanda fully embarked on positioning itself as a hub for financial services.
“The benefits to us as an economy are funds domiciliation and all professional services that come with it (offshore banking, global custodians, trust businesses, fund management,” he said.
That alone, he adds, is high paying jobs for industry professionals in addition to tax revenue.
According to the Ministry of Finance and Economic Planning, the goals are to double the value of the financial services sector by 2024 and to double foreign direct investment into the economy.
“KIFC will be great to attract FDIs [foreign direct investments], stimulating our capital market and offer long-term funds for our financial institutions,” said Nathalie Mpaka, the Chief Finance Officer at Bank of Kigali.
Under the initiative, the Government through the Ministry of Finance has established a company, Rwanda Finance Ltd, which will spearhead the implementation of the blueprint.
A source told Business Times that the new company is particularly tasked with revising tax regimes and legal frameworks for business and investments as well as layout plans to increase financial education and expertise.
Currently, there is not much details available about how exactly that is being done.
But Rwanda’s ambition to position Kigali as a financial centre holds sense, experts say. The country’s economy has been growing steadily for the past few decades with foreign direct investments growing at an accelerated rate.
For the last 10 years, Rwanda has been attracting new foreign financial services entrants, especially banks starting with two Kenyan banks – Kenya Commercial Bank (KCB) and Equity Bank – which entered the market between 2008 and 2013.
More recently, other bank holding companies and pan-African banks have come into the market including Atlas Mara (Britain) which bought a majority stake of Banque Populaire du Rwanda (BPR).
Others include AB Bank (Germany), Ecobank (Togo), Bank of Africa (Mali), Access Bank (Nigeria) and Commercial Bank of Africa (CBA) (Kenya).
What will it take?
Ostensibly, pan-African and international investors see potential in the Rwandan financial sector given a highly supportive regulatory environment for banks and firms doing digital financial services.
That validates the country’s desire to become an international financial services centre.
The country is, however, yet to attract international players in the market including renowned banks, insurance companies and investment funds, among others.
Eric Quartey, the chief executive officer at Axis Pensions Ltd thinks it will take much more than what is currently available.
“Beyond favorable tax regimes, you need a holistic plan for education to produce people who are good enough to drive the financial services – the highly skilled human resource,” he said.
Such fundamentals, he adds, coupled with a high presence of retail investors and institutional investors, such as investment managers, pension funds, insurers, and hedge funds could propel Kigali to become a financial services centre.
That, Andre Gashugi, the Chief Operations Officer at Rwanda National Investment Trust, believes could also create a bigger market for local players like them, as well as easy access to a portfolio of investors.
He argues the ground is laid for Rwanda to be a financial hub, highlighting governance, political stability and support infrastructure among the available prerequisites.
“Becoming a financial hub does not necessarily depend on the size of the market. Players are always looking at the bigger picture, and in this sense, they may want to be in Rwanda with their eyes focused on the region,” he said.
Gashugi cites Mauritius and Singapore as tiny nations that have been able to position themselves as global financial centres.