This week, Energicotel Plc, an independent power producer and an engineering consulting company announced that they have raised Rwf 3.5bn by listing a corporate bond on the Rwanda Stock Exchange. The firm sought to raise Rwf 3.5bn in its first tranche with a 10 year bond with a 13.75 per cent per annum interest rate meaning they had a 100 per cent subscription rate. In the later drives, the firm seeks to raise up to Rwf 6.5bn. The development is proof of the availability and existence of a viable capital market especially at a time when businesses have cited bank loans to be prohibitively expensive. Capital Markets financing is cheaper and more sustainable in the long run in comparison to debt especially for firms with long term growth prospects. This is part of the reason firms such as Energicotel would move to pay off debt obligations which would allow them to optimize future cash flows. Corporate bonds and other capital market instruments are also a great avenue for Rwandans to invest their savings especially as more Rwandans are encouraged to consider saving. In the same week, it emerged that Rwanda is looking into prospects of introducing municipal bonds in the local market to enable districts to raise capital and necessary investment for infrastructure projects. If and when this is implemented, it could see districts across the country no longer relying on government borrowing to mobilize investment for projects such as water supply, sewerage or sanitation, drainage, solid waste management, housing, roads and urban transport among others. Beyond giving a chance to Rwandans to invest funds at low risk with guaranteed returns, it will also enable the country to reduce external debt. The developments this week are a great eye opener for both the business community and ordinary Rwandans on the untapped potential of capital markets as a source of capital as well as a great investment.
