Why Rwanda is set to become the next Singapore

Saturday June 07 2014
jingdong pix

Rwanda’s capital markets are open for business, and international investors are taking notice.

When the country issued its first dollar bond, it received bids worth more than eight times the $3.5 billion on offer, and at 6.875 per cent, Rwanda is paying less to borrow in the international capital markets than some investment grade economies — a ringing vote of confidence from investors.

Rwanda’s debut on the international capital markets was complemented last month by the first international issuance in the country’s domestic capital market.

The International Financial Corporation, a member of the World Bank Group, issued a Rwf15 billion “Umuganda” bond that attracted more than double its size in orders from domestic and international investors — a sign that investors in Africa and beyond are optimistic about the outlook for the Rwandan currency.

Clearly, the government is delivering on its commitment to transform Rwanda into a model economy. Using the capital markets as a springboard is an effective approach; deep and liquid domestic capital markets are foundations for sustained economic growth.

They mobilise international and domestic savings for infrastructure, housing, and other important sectors that need long-term investment.


They also create investment alternatives for domestic money managers and allow companies to borrow in their own currency, protecting them from foreign-exchange risk. They make economies less dependent on foreign debt and more resilient to capital-flow shocks.

Developing the capital markets will go a long way towards ensuring that Rwanda’s economy continues to thrive, and much credit should go to the government for its leadership and vision.

In 2009, the National Bank of Rwanda became the first African central bank to set up a swap agreement with the IFC. This has enabled IFC to exchange dollars for Rwanda francs and in turn offer more than Rwf17 billion in franc-denominated loans to the country’s private sector.

Now we are using this agreement as a model with other central banks.

Rwanda was also one of the first countries to join IFC’s Pan-African Domestic Medium Term Note Programme, allowing the internationally triple-A rated IFC to issue bonds on the domestic stock exchange. The IFC Umuganda bond is the first bond issued under the programme in East Africa. It would not have been possible without the strong support of the Minister of Finance, the governor of the National Bank of Rwanda, and the Capital Markets Authority.

Its success is a testament to Rwanda’s ability to swiftly put in place a regulatory framework that encourages foreign issuers. It is a loud and clear signal that Rwanda welcomes international issuers and investors, and it will help boost the growth of the country’s non-government bond market over the next few years.

Rwanda has made extraordinary achievements in the past 20 years and I believe it can achieve even more.

Year after year, Rwanda shines as a top reformer on the World Bank’s Doing Business report, which assesses how easy it is for entrepreneurs to set up and run a company. This year Rwanda moved up an impressive 22 notches, ranking 32nd of all economies studied in the report.

That was no small feat. It was reminiscent of Singapore, which faced social unrest, high unemployment, and other slim prospects when it became independent in 1965. By the 1980s, Singapore’s GDP was growing at an annual rate of 8 per cent and unemployment had fallen dramatically, thanks to a strategic effort by the government to use human capital and build a world-class market and regulatory framework.

Rwanda can position itself as a financial centre through a continued focus on its comparative advantage, by nurturing the nascent market and regulatory infrastructure. Already Kigali hosts the East African Exchange — a first step toward having regional issuers coming to market on the Rwanda Stock Exchange.

Rwanda is brimming with opportunity, and IFC and the World Bank Group are committed to supporting the government in its pursuit to eradicate poverty and boost shared prosperity.

Through 14 newly established Global Practices — including a new Finance and Markets Global Practice — the World Bank Group will be able to harness the best resources across our institutions and put them to work to help Rwanda achieve its Vision 2020 and transform into a middle-income nation in which Rwandans are healthier, educated and more prosperous.
Jingdong Hua is vice president and treasurer of the IFC