This document provides an overview of capital markets in Rwanda. It discusses the role of capital markets in allocating resources and promoting economic growth. It then describes how the primary and secondary markets work, including the functions of issuers, investors, and intermediaries. It also discusses the Rwanda Over-The-Counter market and the Rwanda Stock Exchange. The document outlines the types of securities that can be traded, membership categories, fees, benefits to investors and issuers, risks involved, and how investors can open accounts and trade. It concludes with an overview of Capital Market Advisory Council's role, opportunities in the market, advantages, and milestones achieved.

1. “Understanding Capital
Market
In Rwanda”
CIMERWA
TUESDAY 6TH APRIL 2010
CAPITAL MARKET ADVISORY COUNCIL
Presented by
Olivier Kamanzi
Dep. Executive Director,
CMAC

2. OUTLINE
 INTRODUCTION
 FINANCIAL SYSTEM
 WHAT IS CAPITAL MARKET
 HOW DOES THE CAPITAL MARKET WORKS ?
 PRIMARY MARKET
 SECONDARY MARKET
 WHAT IS ROTC MARKET / RWANDA STOCK EXCHANGE
 WHAT ONE CAN BUY OR SELL ON CAPITAL MARKET ?
 MEMBERS OF ROTC & COMMISSIONS AND FEES
 BENEFITS TO INVEST & LISTING ON ROTC MARKET
 WHAT IS AN INVESTMENT, WHY INVEST, AND WHO IS AN INVESTOR?
 MONITORING YOUR INVESTMENT AND WHEN CAN YOU START INVESTING?
 HOW TO OPEN AN ACCOUNT AND TRADING
 RISKS INVOLVED INVESTING IN CAPITAL MARKET
 HOW AM I PROTECTED ?
 CMAC OPPORTUNITIES AND ADVANTAGES
 CMAC MILESTONES ACHIED

3. INTRODUCTION
 CMAC BACKGROUNG
The Capital Market Advisory Council (CMAC) was
established by the Prime Minister’s order No. 01/03 of
28/03/2007 with the purpose of guiding the development of
the capital market in Rwanda. The Council is under the
supervision of the Ministry of Finance and Economic
Planning
 CMAC VISION
To be a key contributor to Rwanda becoming a competitive
financial center regional and globally.
 MISSION
To nurture wealth by facilitating the development of an
orderly, fair, transparent and efficient capital market
 CORE VALUES
Good Governance, Knowledge, Creativity and Innovation

4. FINANCIAL SYSTEM IN RWANDA
 VISION 2020
The Financial Sector identified as crucial geared
towards stimulating the economic growth of
Rwanda
 FINANCIAL SYSTEM ARCHITECTURE
 MONEY MARKET – Regulated by BNR
 CAPITAL MARKET – Self regulated
 INSURANCE – Regulated by BNR
 PENSIONS – Regulated by BNR
 MICRO-FINANCES – Regulated by BNR
 NATIONAL PAYMENT SYSTEM – Regulated by
BNR

5. WHAT IS CAPITAL MARKET
 A market for SAVINGS and INVESTMENTS.
Brings savers and investors together.
 Market for long term funds required to finance
long term projects.
 Section of the financial sector that mobilizes
savings and channels them to the most
productive sectors of the economy.
 If investment is going to increase the wealth of a
nation, it must be channeled into productive
businesses.

6. ROLE OF CAPITAL MARKET IN THE ECONOMY
Allocation of savings resources at the most efficient prices
2. Corporate governance
i. transparency through disclosure
ii. higher standards of accounting
3. Risk sharing through wide share ownership
4. Promote ease of access to finance as different
users of capital can choose among different
methods i.e.
-commercial paper
- shares
-bonds
-government bonds
-municipal bonds

7. ROLE OF CAPITAL MARKET IN THE ECONOMY
1. Allocation of savings resources at the most efficient
prices
2. Corporate governance
a. Transparency through disclosure
b. Higher standards of accounting
3. Risk sharing through wide share ownership
4. Promote ease of access to finance as different
users of capital can choose among different
methods i.e.
a. Commercial paper
b. shares
c. Bonds – Government and Corporate
d. Municipal bonds

8. ROLE OF CAPITAL MARKET IN THE ECONOMY
5. Promote growth of financial services to accelerate
growth
a. Insurance
b. Pensions
c. Collective investment schemes
d. Funds Management and administration
e. Banking
f. Real estate & property
g. Infrastructure development
6. Privatization
7. Widening ownership of business and spreading the
risks and wealth of a nation among the households.

9. ROLE OF CAPITAL MARKET IN THE ECONOMY
8. Savings from diasporas. Easy to use capital
market to tap nationals savings earned in
foreign countries.
9. Attract FDI as capital market provide an exit
window
10.Diversification from traditional economic
activities like agriculture
11.Savings culture through public education in
investments
12.Encouraging self reliance

10. HOW DOES THE CAPITAL MARKET WORKS?
 3 Components: Issuers, Investors, and Intermediaries
 Organized markets where buyers and sellers (Investors or
the public) meet
 A stock exchange or an OTC market has professional
intermediaries.
 Capital markets has two levels;
A. Primary Market: to raise new capital
B. Secondary Market: day to day trading of already listed
securities.
 Capital markets rely on;
Rules and regulations
Physical infrastructure
 Companies disclose all useful information about their
businesses

11. TRANSACTION FLOW – PRIMARY MARKET
Issuer is admitted to list on the OTC
Offer closes and announced and
allotment follows
Public investors subscribe to
securities during the offer period
Issuer states the offer period
and offers securities to the
public
Issuer applies to list securities
on the OTC market
Issuer prepares draft prospectus
or information memorandum
Issuer appoints advisors
sponsors / agents
Issuer offers
Decides to raise capital

12. SECONDARY MARKET
Buyer client
Member
Stockbroker
(Buyer)
CMAC
OTC
Trading
facilities
Registration
Member
Stockbroker
(Seller)
Seller Client
Market
Report

13.  Market where transactions are negotiated
between a buyer and a seller.
How does the Rwanda OTC market operate?
 A dual trading process
 Members trade securities directly with
investors and among themselves
 Open outcry trading sessions are
conducted at the trading floor of the OTC
market.
WHAT IS AN OTC MARKET

14. ROTC MARKET PERFORMANCE
 The primary debt market raised a total of
Rwf.15.2 billion. On secondary market a total of
Rwf 643 million worth of bonds were traded in
52 transactions.
 BCR 10 years, 9% coupon, Corporate Bonds
 FXD1, 8%, 2 year, Treasury Bonds
 FXD2, 8% 2 year, Treasury Bonds
 FX3, 8.25%, 3 year Treasury Bonds
 Cross listing of KCB: Turnover of Rwf 12million
from 63,000 shares traded since 18th
June 2009

15. The Rwanda Stock Exchange was
established in 2005. It is a dormant
company yet to be activated. It will be
expected to run the trading operations
of the Rwanda OTC Market.
RWANDA STOCK EXCHANGE

16. Treasury Bonds
Corporate Bonds
Security Maturity Coupon
Rate
%
Closing
price
08/5/08
Rwf
YTM
%
Prev.
Price
07/5/08
Rwf.
Bid Offer
(Ask)
Sales
Rwf
FXD1/2008/2yr 14/01/2010 8.00 100.250 6.912 100.00 - 102.00 5M
FXD3/2008/3yr 31/01/2011 8.25 - - - - - -
Bond Rate (TB) Maturity Closing price
31/1/08
Previous price
31/1/08
Bid Offer (Ask) Sales
Rwf
BCR
2yr
FXD1/2008+
1.00%
2017 102.2500 102.2500 - - -
UNDERSTANDING THE MARKET REPORT

17. Shares and bonds
WHAT IS A BOND?
 A bond is a debt.
WHAT IS A SHARE / EQUITY?
 A share is a unit of ownership
 Participate in the affairs
 Your voting rights at the General meetings
 A dividend income
WHAT CAN ONE BUY ON ROTC MARKET?

18. 7 members
Three categories of membership:
Stockbrokers, Dealers, and Sponsors
MEMBERS OF THE RWANDA OTC MARKET?

19.  Helps investors to either buy or sell
securities
 Acts as the middleman or intermediary
between investors
 Gives advice to investors
 To qualify as a broker
 Minimum education skills and
professional qualifications
WHO IS A STOCKBROKER OR BROKER/DEALER?

20. The current brokerage fees are:
 Bonds (debt): First Rwf 5m……………1/8%
Above Rwf 5m ………………..……negotiable
Shares (equities): First Rwf 100,000...1.5%
Above Rwf 100,000……………………………..
negotiable
HOW MUCH COMMISSIONS OR FEES DO
STOCKBROKERS OR B/D CHARGE?

21.  Savings
 Income
 Wealth or Capital gain
 Securities as Collateral
 Liquidity
BENEFITS TO INVESTORS?

22.  Access capital
 Discover the value of its business
 Raise a company’s visibility and enhance its
status with customers and suppliers at home and
overseas
 Have better bargaining position with financiers
 Enhance management practices
 Foster employee motivation
 Benefits from Capital Market incentives
 Use of shares as currency
 Listed securities are easily acceptable as
collateral against loans from financial institutions.
BENEFITS TO ISSUERS OR LISTING ON OTC
MARKET?

23.  Payday
 Postponing your consumption today
 savings
WHAT IS AN INVESTMENT?
WHY INVEST?
 Creating wealth
 It is impossible to create wealth without
investing
 Secure the future
 Comfortable retirement
 Investment is a time-honored practice for
increasing your wealth

24. Anyone with
Investment objective
Time horizon for his investment
Risk torelance
Expectation of return and money to
invest
WHO IS INVESTOR?

25.  Actively follow or monitor his investment
 Developments within the company you
invested in
 The stock market
 The economy as a whole
 Reading the business pages of the
newspapers and listening to local FM
station and TV
MONITORING YOUR INVESTMENT?

26. NOW!!!
WHEN CAN YOU START INVESTING?

27.  Open an account with a brokerage house
 Making contact with a broker of your choice
 Personal particulars
HOW TO OPEN AN ACCOUNT?
TRADING ?
 Trading arrangement
 Only through authorized Members (Stock
brokers)
 Trading is open to the general public

28.  Business risks
 Behavioral risk / Counterparty risk
 Poor or fraudulent
 Market risks / Systemic risk
 Price fluctuation(worldwide)
 Perceived risk / Fear
RISKS INVOLVED INVESTING IN CAPITAL
MARKETS ?

29. CMAC ensures that only competent and credible
professionals are licensed to serve the market.
CMAC supervises all members of ROTC to
ensure compliance with regulatory requirements
CMAC ensures that prospectuses of issuers
have adequate disclosure for decision making
CMAC ensures that there are periodic reports
and all price sensitive information are released
once they are available
National public education and awareness
campaigns create well informed investors
Developing a legal framework.
HOW AM I PROTECTED?

30.  Stockbrokers;
 Investment advisors;
 Registrars; Fiscal agents;
 Custodians; Data vendors; Credit Rating agencies;
 Investment banks;
 Venture Capital companies; Investment clubs;
 Investment research houses; Financial analysts and
journalists;
 Financial Publications; Discount Houses (Treasury
bills on Rwanda OTC market);
 Fund managers and Asset managers;
 Hedge funds.
 Etc…
CAPITAL MARKET OPPORTUNITIES?

31. Viability of projects determined by
demand and supply.
Liquidity and projects pricing is made
possible through public participation
Availability of information by investing
publicly.
CAPITAL MARKET ADVANTAGES?

32.  ROTC Market fully functioning (primary and secondary
market)
 7 Active Members
 Legal Framework: Draft Law on Capital Market Authority, Draft
Law Regulating Capital Market in Rwanda, Law Regulating
Collective Investment Schemes – approved by the Cabinet
 Policy Proposals
 Privatization of Government Shares through the capital
market
 Fiscal and None Fiscal Incentives: set of incentives and
recommendations aimed at stimulating the investment
environment for the development of the capital market in
Rwanda
 CMAC Strategic Plan – 5 years
 National Public Education and Awareness Program
 Capacity Building – Training program for Market Participant
and Staff
 New Listing
 Integration into East Africa Capital Market – Member of
EASRA & EASEA
CMAC MILESTONES ACHIEVED?

33. MURAKOZE
CYANE