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New five-year bond to stimulate investment in Rwanda

International Finance Corporation (IFC), a member of the World Bank Group, has issued its first bond denominated in Rwandan francs [RWF], raising RWF15 billion (about $22 million).

IFC said the five-year bond, dubbed ‘Umuganda’ is aimed at expanding the availability of long-term local-currency finance for local businesses while strengthening the country’s domestic capital markets.

Umuganda marked the first placement by a non-resident issuer in Rwanda’s domestic capital markets. IFC vice-president and treasurer Jingdong Hua said: "Rwanda is a country brimming with promise. The IFC Umuganda bond will support the development of the country’s capital markets so they can intermediate savings and private sector investment.”

Rwanda’s finance and economic planning minister Claver Gatete said: “Rwanda's capital markets can play an essential role in boosting the country's development. The success of IFC's Umuganda bond demonstrates that Rwandan capital markets are ready to welcome investors in Africa and globally.”

In June 2012, IFC received approval for a local-currency bond programme in Rwanda, under which IFC can issue bonds of up to 200 billion Rwandan francs, or about $290m. Standard Bank South Africa/CfC Stanbic Bank and Bank of Kigali Rwanda Ltd are lead arrangers for the programme. KCB Bank Ltd is the fiscal agent for IFC on the issuance.

According to IFC, Umuganda was designed to appeal to a broad range of domestic and international investors looking to diversify their portfolios. “The order book was 2.19 times oversubscribed,” IFC said. “Orders were received from Rwandan pension funds, international and domestic asset managers, insurance companies, and banks. The bond was issued at par and priced with a yield of 12.25% per annum.

In Rwanda, IFC said it is focused on “accelerating economic growth through private sector development, strengthening the investment climate, and improving agricultural production and income”. IFC said it is committed to expanding access to local-currency finance for micro, small and medium enterprises, which it said are “the key drivers of job creation”.

IFC is the largest global development institution focused exclusively on the private sector. IFC bonds are rated triple-A by Moody’s Investors Service and Standard & Poor’s.

In IFC’s ‘ease of doing business ranking’ for 2014, Rwanda is placed 32nd out of 189 economies (including 47 economies in sub-Saharan Africa), compared to a comparable ranking of 54th in 2013.

IFC’s rankings are calculated as the simple average of the percentile rankings on each of the 10 topics included in its ‘doing business index’: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency.

An International Monetary Fund (IMF) mission to Rwanda last month said economic growth had slowed to 4.6% in 2013, “reflecting weak agriculture as well as aid-related delays in the implementation of government financed projects”.

However, the IMF said economic growth is projected at 6% for 2014, “driven by a rebound in agriculture and a pick-up in the services sector”. The IMF said this would “require firm execution of the government’s investment programme”. Inflation is expected to be about 5% at the end of 2014, the IMF said.

According to a survey published in 2013 by the National Bank of Rwanda, the National Institute of Statistics, the Rwanda Development Board and the Private Sector Federation, foreign private capital investment in Rwanda in 2011 stood at $357m, which was an increase of 4.1% from the $343m recorded in 2010.

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