The Government is optimistic that the Rwf12.5bn Treasury Bond will create public awareness and prompt the people to start investing in local capital market.

Today, Government starts accepting bids from investors, the lowest being Rwf100,000 and the highest Rwf50 million.

Speaking during a radio talkshow yesterday, Amb Claver Gatete, the Minister for Finance, said the bond issuance, part of the Treasury Bond programme to boost the capital market development and fund infrastructure projects, was an avenue for the public to save while earning interest on their investments.

 "This is different from buying shares at the RSE as one who offers to lend the government is issued a paper bond which enables them to earn interest together with the initial investment at the end of the maturity period,” he explained.

Amb. Gatete added that if one wanted to get their money back before the maturity period, they are free to look for a buyer of the paper bonds, through the help of their broker at the RSE.

Treasury bonds are issued in terms of years and earn interest to the investor every six months until they mature. When a Treasury Bond matures, the investor is paid its face value.

Bids from investors will be received until Thursday at a minimum of Rwf100, 000 for individuals, while companies are allowed to enlist for competitive bids at a minimum of Rwf50m per bond. Gatete said the interest rate will be determined by the demand for the bond.

John Rwangombwa, Governor of the National Bank of Rwanda (BNR), said preference will be given to the lowest bidder. 

Between 2008 and 2011, the government issued long term Treasury Bonds, amounting to Rwf31bn, in a bid to promote the capital market by availing investment opportunities to the public.

Gatete said the investors at the time were able to earn an interest at a rate of between eight and 11.5 per cent which was fair enough.

The RSE currently has three government bonds, and an eight-year corporate bond worth Rwf10bn issued in 2010 by I&M Bank (formerly Commercial Bank of Rwanda).

However, the Rwandan bond market is still relatively small and inactive at both secondary and primary levels unlike in countries where markets are more developed.

Rwangombwa said it was the first time the bond was availed to investors countrywide and within the east African region. He said it was an opening for Rwandan investors.  

"Developed countries do not look for donor aid when looking for funding. They always turn to their capital markets,” he noted.

The government has been using short-term instruments such as Treasury-bills that range from 91 to 182 days. Following the resumption of donor aid last year, the government reduced borrowing from the domestic market as shown by interest rates on Treasury-bills, which fell to 5.6 per cent as of December last year, down from an average of 12 per cent in April the same year.

Experts say the bond issuing marks an important step in the bid by Rwanda’s Capital Markets Authority to source funds for investments in key infrastructure projects.