IFC issues first Rwanda Franc offshore bond

In what capped the events of the East Africa Capital Markets conference that ended yesterday, in Kigali, International Finance Corporation (IFC), the private sector lending arm of the World Bank, issued Rwanda’s first offshore bond in Rwandan francs. The three-year $5 million (Rwf3.5 billion) bond was snapped up by five international investors through transaction arranged by two international finance institutions, Citi Bank Group and Standard Bank. It attracted a yield rate of nine per cent and will be used to finance IFC-funded private sector projects in the country. It will be listed in Luxembourg. Jingdong Hua, the IFC vice president for treasury and syndications, said the placement of the bond followed the decision by Euroclear earlier this week to add the Rwanda Franc as a new denomination, which paved the way for it to be an offshore investment currency. Euroclear is a Belgium-based financial services company that specialises in settlement of domestic and international securities transactions, covering bonds, equities, derivatives and investment funds. Jingdong said they had been working on the bond, dubbed Twigire, in order to enable private investors contribute more to Rwanda’s economic development. IFC now has three sources of local currency financing, one of which is a swap line with the National Bank of Rwanda and the other the Umuganda bond, which they issued in Rwanda in May, last year. “We now have a menu of local currency financing possibilities. With this Twigire bond transaction, while the size is small, it is significant because we are linking international investors to domestic investments in the private sector,” Jingdong told The New Times yesterday. He added that with the bond being a pilot one, Rwanda had a chance of attaining similar success such as India where the IFC had issued local currency bonds of up to 10 years, thus setting a yield curve for offshore local currency bonds. “Rwanda’s economic development path undeniably requires more private capital flows. A vibrant capital market is a required condition for sustainable development,” Amb. Claver Gatete, the minister for fianance and economic planning, said. “IFC is playing a leading role in continuously providing groundbreaking transactions for developing countries and bringing new products and new investors to our playing fields.” By borrowing in the local currency, projects financed by the bond will be cushioned against costs that could accrue in the event of depreciation of the local unit against international currencies, such as the US Dollar. “This is a positive development for the Rwandan economy because it simply means that we have Rwandan investors, especially in the private sector, who have been funding their businesses using foreign currency, like US dollars, yet the projects they invest in generate income in local currency,” said Robert Mathu, the executive director of Capital Markets Authority.

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IFC issues first Rwanda Franc offshore bond