The Rwanda Capital Markets Advisory Council (CMAC) is set to embrace a credit rating system in the near future in a move aimed at providing investors with information on the credit quality and volatility of securities listed on the country’s stock exchange.
The capital markets regulator says the system defines the financial strength of borrowers and their capacity to meet their financial obligations.
The East African region has got only one credit rating institution (Global Credit Rating) that is based in Kenya.
Olivier Kamanzi, the Deputy Executive Director of CMAC said the agency is prospecting to establish business in Rwanda.
“This process is very important for Rwanda capital markets because it provides market confidence among investors in Rwanda and attracting foreign investments,” he explained.
He added that the credit rating services, which are offered by a credit rating agency, provide opinion on the general creditworthiness of a borrower with respect to a particular debt security or other financial obligation.
“The analysis and assessment provided by various credit rating agencies provide investors with information and insight that facilitates their ability to examine and understand risks and opportunities associated with various investment environments,” said Kamanzi.
The CMAC says that the project is purely a private sector initiative. However, any one planning to open a credit rating agency must be licensed by the capital market regulator.
According to Kamanzi, currently there is no company in Rwanda that is rated.
“The rating can be for short term or long term, with both countries and corporate being rated,” explained Kamanzi.
The new development will gain momentum with the upcoming credit rating workshop planned to take place next month.
The workshop is expected to attract 100 private Rwandan companies including Small and Medium Enterprises (SMEs), Government agencies as well as Kigali city, CMAC officials said.
With the new system in place, it is expected that investors can make informed decisions as to the countries, industries and classes of securities in which they choose to invest.
Kamanzi said that it also encompasses sovereign credit rating of a country, debt or bond rating, long term obligation as well as short term ratings.