The launching of the Rwanda capital market last week was a great achievement. The country needs a stock market for companies to raise long term capital. This capital is looked at as some thing that would spur the development of the private sector, as it will be able to access long term financing.
Through a capital market and a stock exchange in particular, government would raise funds to finance infrastructural development—
thereby cutting donor dependence.
And, with a poor saving culture in Rwanda, it is believed that a capital market would inculcate a saving culture among Rwandans who will invest in financial products.
The accumulated savings can be reinvested in other immovable properties that banks require as collateral for loans.
The governor of the National Bank of Rwanda François Kanimba says the capital market will offer competition to commercial banks whose interest rates are very high. They may be forced to lower lending rates.
Architects of this theory say instead of one consuming all his earnings, they would invest in profitable financial products currently being offered.
However some people have urged that the country was not yet ready for the capital market because of the missing ingredients.
They say that there is no law governing the accountants as the Accountants’ Bill is yet to be approved by parliament and that most companies do not meet the standards of listing on the stock market due to poor book keeping.
Whereas most financial experts across East Africa have commended this milestone achievement, they say that government and the Capital Markets Advisory Council (CMAC) have a daunting task of nurturing the market to have a positive impact on the Rwandan community.
Dr. F.M. Mboya, the chief executive officer of Tanzania Stock Market (TSM) believes that if the common man is to benefit from the market, then a lot of sensitisation must be carried out.
He advised the CMAC and government to quickly create an equity market as opposed to the OTC market that deals in bonds only.
He also suggested that if government has any company to privatise, this activity should be done at CMAC, for the common man to participate.
He was however quick to say that the Rwanda Capital Market will benefit from other developed East African Community capital markets.
Jimna Mbaru, chairman of Nairobi Stock Exchange (NSE) said the Rwanda Capital Market is to brand Rwanda as a country on the global market. He however advised the CMAC to target banks, brewing companies and cement manufacturing companies saying these industries always require long term funds.
In order to provide a favourable environment for companies to quickly come on board to offer equity, Mbaru called upon government to offer some incentives like amnesty to companies that keep double books of accounts. Japheth Katto, the chief executive officer of Capital Market Authority (CMA) in Uganda said government should help banks, insurance companies and pension fund institutions to develop reasoning that these institutions provide financial linkages to the market.
"There is also need for investor education because an investor who is aware is an investor who is protected," Katto noted.
Simon Rutega, the chief executive officer of Uganda Securities Exchange said tax incentives to both listed companies and savers should be granted. He added there should be differentiation of both withholding and corporate taxes to listed companies and companies that are not listed.
Experts also call for incentives to savers. They propose that a percentage of some one’s income that is saved through the capital market should be tax exempted and that government should introduce compulsory saving schemes.
Companies must also adhere to auditing and accounting standards and government should introduce regulations that allow innovation to take place. The launch of the capital Market in Rwanda has come at a time capital markets in the three East African community countries of Kenya, Uganda and Tanzania are looking forward towards integration.
They urge that this will widen the market, lower transaction costs, offer more products and also create efficiency in the market.