Statistics from the Rwanda Stock Market show that equities and bonds worth Rwf 436.5bn have been issued on the local market.
The figures comprise equities worth Rwf92bn which were offered by local firms during their first public offering and they were able to get a return of more than Rwf 219.3bn in the period from January 2011 to January 2019.
For bonds whereby the government remains the biggest participant in trading, the state has raised capital worth more than Rwf303.5bn.
Locally, I&M Bank is the only local company that has so far issued a cooperate bond worth Rwf1bn and International Financial Cooperation a private arm of World Bank Group, also became the first international financial institution to put trust in the local market.
According to Celestin Rwabukumba, the Chief Executive of Rwanda Stock Exchange, the listing of IFC’s five years inaugural bond in the East African region on the platform was of great significance in relation to trust, adding that the arm has already bagged Rwf32bn with returns of about 12.5 per cent a good sign of the potential of the primary market.
However, in spite of the growing trust and good performance demonstrated over the past eight years, Rwabukumba said that there still exists bottlenecks which impede potential performance.
“We are still encountering challenges, especially with the secondary market liquidation caused by lack of firm investors, this affects the share value, thus damaging the much-needed investor confidence as the value tumbles”, he said
But Rwabukumba is also optimistic with the developments within the private sector and recent private pension schemes debut, which he says will address most of the existing problems. This is because the current framework requires private pension schemes to keep part of their capital in equities.
“We are happy with what is happening in the private sector, especially in the pension sector, as the private pension schemes will have to secure part of their wealth in capital markets, this will solve part of the problem,” he added.
Players seem to differ with regard to the solution to the liquidity of the secondary market, pointing out that the companies have to increase their profit margins if they are to attract potential investors and avoid share price losses.
Jessica Mwiseneza, of African Alliance Rwanda Securities, a local brokerage firm, said that the only way to increase the liquidity of the secondary market is for listed firms to increase their profit margins by investing in avenues that are profit making. That way, she said, listed firms would be more attractive for investors.
However, many agree that more needs to be done in terms of raising the general public’s interest in the equities and bond investment.
Rwabukumba said that there still exists gaps in the public confidence in the stock market for which they are seeking avenues to address, including awareness campaigns.
Rwanda Stock Exchange was officially commissioned in January 2011, as an alternative to local firms to mobilise local funds and since then eight firms. have featured on it.