The local bourse must be supported to develop and expand its products’ base to make it more vibrant and attractive to investors, the National Bank of Rwanda (BNR) chief economist Thomas Kigabo has said.

Kigabo said a vibrant stock market would make it easy for firms and the government to raise development capital to fund long-term projects, a problem that has dogged them for long. He noted that commercial banks can finance big projects through syndicated loans. "Most depend on customer deposits which cannot finance long-term projects like hydropower generation and road construction,” he said.

Speaking to The New Times on Tuesday, Kigabo argued that developing the capital markets should be prioritised as it will help the private sector, especially small businesses, and government raise funds to finance long-term ventures.

The National Bank of Rwanda, in collaboration with the Ministry of Finance and the Capital Markets Authority, early this year started initiatives aimed at developing the financial market so it can be used by firms to mobilise long-term resources to finance development projects in the country and offer a wide range of investment opportunities to investors.

The issuance of quarterly treasury bonds programme is part of this initiative. The first bond worth Rwf12.5b was issued in March, which hit a 140 per cent oversubscription rate or Rwf17.5b.

Between 2008 and 2011, the government issued long-term Treasury Bonds amounting to Rwf31b, also with the aim of developing the securities exchange market. However, the local bond market is still relatively small and inactive at both the secondary and primary markets compared to Kenya, Uganda and Tanzania whose bourses are more developed.

"We hope to issue bonds that go up to 30 years soon. We also want private companies to start issuing their bonds targeting foreign investors because the local environment is already prepared for such issues,” said Kigabo.

He was optimistic that such a move would address the mismatch between short-term liquidity and long-term needs in the financial sector.

The Rwanda Stock Exchange has two corporate bonds; I&M Bank 10-year bond and IFC’s five-year as well as the recently-listed three-year government treasury bond, on the second market. The main market has five firms listed – Bank of Kigali, Bralirwa, and Kenya companies which are cross-listed, Nation Media Group, Uchumi Supermarkets and KCB. Although the alternative market segment was okayed last year, it has failed to attract firms to list on the exchange.