A draft law establishing the Capital Market Authority of Rwanda (CMA) has introduced a provision that will make the institution operate as a specialised organ, a status which will allow it to be granted the necessary autonomy in terms of recruiting and managing its staff. The bill seeks to amend the law of 2017 establishing CMA, which is a public institution responsible for developing and regulating the capital markets industry, capital markets activities, securities, commodities exchange and related contracts, collective investment schemes and warehouse receipts system. Its relevance was approved by the virtually-held Plenary Session of the Lower Chamber of Parliament on Tuesday, 08 June, and will move to scrutiny by a parliamentary responsible committee. A capital market is a market for securities which could be debt or equity, where business enterprises and government can raise long-term funds. Securities traded in the capital market are usually long-dated financial instruments such as treasury bonds, municipal bonds, shares or stocks issued by companies. CMA has a mission to protect investors, ensure an orderly fair, transparent and efficient market and reduce systemic risk. While explaining the relevance of the bill, the Minister of Finance and Economic Planning, Uzziel Ndagijimana told lawmakers that following the government decision to establish Kigali International Financial Centre (KIFC), the Law establishing CMA was identified among the key legal instruments to be aligned with international standards. He observed that the KIFC strategy highlighted the importance of Rwanda to obtain full membership of the International Organization for Securities Commissions (IOSCO) since the full membership to this global securities body will further increase foreign investors’ confidence into the Rwandan market while easing the implementation of the KIFC strategy. IOSCO is the international body that brings together the worlds securities (capital market) regulators and is recognised as the global standard setter for the securities (capital market) sector. It develops, implements and promotes adherence to internationally recognized standards for securities (capital market) regulation, and works intensively with the G20 and the Financial Stability Board (FSB) on the global regulatory reform agenda. The assessment carried out by IOSCO assessment conducted on Rwanda’s compliance status to its objectives and principles of securities (capital markets) regulation in 2015, concluded that the CMA, as a relatively new institution --created 10 years ago --, should address identified gaps, the Minister indicated. He said that the identified gaps are in compliance with the IOSCO legal and regulatory framework requirements, and capacity building of CMA institutional and human resources towards implementing its mandate. Considering the nature of CMA market development and regulatory functions increasing pace of business activities, Ndagijimana said, CMA should be operationally independent in the exercise of its functions and powers. “CMA, therefore, needs much more flexibility in terms of decision-making and day-to-day operations management by entrusting its Board of Directors and management with the necessary powers to respond more quickly to the institutions growing operational challenges,” he observed. MPs requested strategies to ensure that more Rwandan citizens are interested in participating in the capital markets so as to foster its growth, mainly to avoid reliance on foreign investors. MP Odette Uwamariya wanted to know how the bill could increase the participation of Rwandans, especially the private sector, in investing and saving in through capital markets. “I think this can help them to raise long-term finances which can boost investments in our country, which has been dominated by the Government,” she said. Given that the capital market funds are charged at lower interest rates than those charged by banks, Uwamariya asked how districts or decentralised administrative entities can participate in the capital market so that they get funds to implement development initiatives. Minister Ndagijimana said that CMA has been training officials in districts and the City of Kigali on how they can do that, especially in terms of shares and financial management, indicating that clean and well-performing financial statements is important for an entity to be eligible to trade its securities on the capital market. So far, 10 companies are registered on Rwanda Stock Exchange.
