Is it time for Rwanda to issue more infrastructure bonds?

Rwanda has been issuing Treasury bonds for over two years now to finance infrastructure projects and develop the local capital market.
Dealers during a trading session at RSE. The bourse presents huge opportunities to raise funds. / Courtesy.
Dealers during a trading session at RSE. The bourse presents huge opportunities to raise funds. / Courtesy.

Rwanda has been issuing Treasury bonds for over two years now to finance infrastructure projects and develop the local capital market.

The government’s quarterly Treasury bond issuance programme started in 2014 and has been highly successful with investor appetite growing by each bond issuance. This is what is giving pundits optimism and confidence that other instruments like municipal and infrastructure bonds could also attract huge investor interest.


They added that the government can ride on this investor confidence to issue local currency-based infrastructure bonds.


Jimnah Mbaru, the Dyer & Blair Investment Bank chairman, said Rwanda can leverage this opportunity to raise finance for key development projects instead of sourcing from international financiers. This, he added, helps raise affordable finance to plug infrastructure funding gaps faced by developing economies, like Rwanda. Kenyan-based Dyer & Blair Investment Bank was the lead transaction advisor for the I&M Bank Rwanda IPO.


Mbaru, who was speaking during the listing of the I&M Bank on the Rwanda Stock Exchange last week, said investor appetite for the country is on a steady trajectory thanks to the enormous investor confidence and good leadership.

“The government and private sector should take advantage of this and bring more infrastructure bonds to the market to further develop and support the local financial market,” he told Business Times.

This is on the back of government announcement that the proceeds from the sale of its 19.81 per cent (or over 99 million shares) stake in I&M Bank Rwanda would be used as initial equity toward the development of Bugesera International Airport.

Government cautious

Government is moving cautiously as it prepares to issue infrastructural bonds, according to Amb Claver Gatete, the Minister for Finance and Economic Planning. Gatete said government will be issuing more bonds, but in “a cautious manner”.

Speaking at the listing of I&M Bank Rwanda on Friday, the minister said issuance of infrastructure bonds must be done bearing in mind the type of investment projects that generate the best rate of return. “We have done so in the energy sector, but we need to first look at which projects are most profitable to avoid being trapped,” he noted.

Speaking at the event, I&M Bank board chairman Bill Irwin said government’s desire to promote and support the capital market could stir more interest and encourage other companies to come to the market, a situation that will expand offerings on the bourse and give value to customers. This would also build a strong base to mobilise resources for long-term investment projects. The country should also take advantage of the fact that RSE is a member of the East Africa Securities Regulatory Association and East Africa Stock Exchanges Association and bring more IPOs to the market.

Municipal bonds

Meanwhile, Robert Mathu, the Capital Market Authority chief executive, said they are working hard to help local governments raise development funds through municipal bond issuances. Mathu said municipal bonds are good vehicles for economies, like Rwanda, to raise capital for infrastructure projects.

In a recent interview with media, Victor Nkiiri, the general manager of Securities Fidelity Commercial Bank, urged regional governments to issue infrastructure bonds to help open markets for municipal bonds. He said there is a lot of infrastructure development in the country, which justifies the need for such bonds.

According to sector players, public sector financing needs are increasing around the region and in Rwanda for a range of reasons, including rapid urbanisation which has led to greater demand for municipals to invest in infrastructure development. They add that with traditional sources of finance insufficient to fast-track government’s economic objectives; the only best alternative is the capital market as a major source of raising investment finance to help close the funding gap.

Though the government, through the Capital Markets Authority (CMA) and the Ministry of Local Government, issued guidelines and regulations to help guide issuing municipal bonds in 2014, not a single local government has come to market about three years later. Some mayors were, last year, not aware of the law while those who knew about it cited challenges like lack of information, expertise, narrow assets’ base and development plans as limiting factors. If local governments, like City of Kigali, took advantage of the opportunities presented by municipal bonds they could be able to raise affordable funds to implement long-term projects instead of having to rely on government grants to undertake such initiatives.

A work in progress

Mathu said they are encouraging the private sector and local authorities to come to the stock exchange to generate development finance. Dr James Ndahiro, the Rwanda Stock Exchange board chairman, supports the idea of government bond issuances, saying this will continue to drive market development. He, however, noted that there is need to invest in capacity building to help build a pool of experts for the sector and also related facilities to take the market to the ‘next level’ of its development.

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