Financial Sector Development Department
Financial Sector Development Department is made by two directorates:
Key functions
Financial Sector Development Program II (FSDP II)
The second Financial Sector Development Program (FSDP II) follows from the highly successful FSDP I, adopted in 2008, which helped catalyze a dramatic increase from 47 to 72 percent of the population with access to financial services, placing Rwanda well on track to reach 80 percent by 2017. Two main drivers underlying FSDP II are a focus on soundness and stability, and positioning Rwanda within the prospective common market for financial services in the East African Community (EAC). The overarching vision of FSDP II is to develop a stable and sound financial sector that is sufficiently deep and broad, capable of efficiently mobilizing and allocating resources to address the development needs of the economy and reduce poverty. FSDP II comprises four main programs: a) Financial inclusion b) Developing financial institutions, markets and the supporting infrastructure c) Investment and savings to transform the economy d) Protecting consumers and maintaining financial stability.
Reflecting prior accomplishments, FSDP II is less about the creation of institutions and markets, and more about building from a sound base to expand outreach, efficiency and innovation, and integration in the EAC.
A Strategy for Making Rwanda a Financial Service Centre in the Region (Maxwell Stamp Report)
As elaborated in Vision 2020, Rwanda’s long-term development goal aspires to transform Rwanda into a financial services centre by the year 2020. This report sets out a strategy and road map to achieve that goal. It is essentially outward looking. It discusses measures to strengthen the domestic financial system, particularly in areas which will help the development of Rwanda as a regional and international financial centre.
Non Banking Financials Instutitions
Rural and Agricultural Financial Services Strategy
The Government of Rwanda is implementing a set of reforms to enable Rwanda to evolve from subsistence agriculture and food insecurity towards market-oriented agriculture. Efforts are concentrated on a few selected priority staple foods and horticultural commodities.
The financing of agricultural value chains is the key challenge for rural and agricultural finance in Rwanda, particularly in relation to staple crops, inadequacies of the value chain infrastructure and asymmetries of information between actors and a shortage of agricultural finance at the post-harvest stage. The main bottlenecks to the provision of financial services are: Value chain financing bottlenecks, no warehouse receipt regulations, lack of products to serve rural smallholders, insufficient skills for risk assessment and management in the sector and inadequate rural banking infrastructure (branches). The target is to transform and modernize traditional smallholder farmers which require significant developments in the financial sector.
Saving Mobilization Strategy
The strategy begins with a review of national objectives and targets for Savings mobilization and the coherence of these targets with national objectives for a sustainable economic development. To gain a strong understanding of Rwandan context as well as the international best practices, a background research was conducted involving both primary and secondary sources. Six Pillars have been identified as the foundation for saving mobilization. When those key issues are addressed properly will strengthen financial infrastructure, mobilize savings and help culture of saving. These are; 1) Macroeconomic Stability, 2) Institutionalized savings, 3) Expansion of the financial infrastructure and intermediation, 4) Secure and diversified means of savings, 5) Building capacity and efficiency of intermediation, and 6) increased awareness of tangible benefit of savings.
National Microfinance Policy Implementation Strategy
This designed national microfinance policy implementation strategy covers the period from 2013-2017. The purpose of formulating this document is to provide Rwanda with realistic framework that defines principles, objectives and key line of actions for microfinance sector development for the next five years. This document emphasizes the client perspective and reflects the main orientation of bringing adequate financial services to the whole population building upon on the past performance. The document offers the guidance to all microfinance players and the public, the actions and steps to be taken to provide financial services at reasonable cost provided by a diversity of well-managed and sustainable institutions.
Crop and Livestock Insurance Feasibility Study
This report presents the role of insurance in the agriculture sector as the government of Rwanda has a goal to have agriculture sector to become a professional sector.
Investing in agriculture is unfortunately not easy, whether agricultural production fails or succeeds does not only depend on a farmers’ agricultural knowhow due to whether, it also depends on the climatic and environmental conditions, which are generally beyond the grower’s control.
This study reviewed the availability of statistics on whether data to determine which data was available, where was it recorded, and if there were any gaps in the data, mortality and on yield. With this information a map was constructed showing the available weather stations in Rwanda. With such a map, stakeholders in the sector can quickly assess the viability of index insurance for any given client who expresses an interest in insurance.
Building an Inclusive financial Sector in Rwanda
Building an Inclusive Financial Sector in Rwanda (BIFSIR) is a UNDP/UNCDF funded project since 2010 and revised in 2013. BIFSIR management designed an innovative program which would increase the client outreach and contribute further to the MGDs result 1 and Government of Rwanda policies. The revised program will scale up entrepreneurial capacity building, financial education and financial linkages to target groups of youth and women. This program is set from strategic framework of the National Microfinance strategy and aims at contributing to poverty reduction and achieves Millennium development goals (MDGs) by promoting financial inclusion. Its specific objectives is to contribute to capacity building of the various microfinance sector players at the macro, meso and micro levels with a view of supporting the development of sustainable, quality and diversified financial services that are accessible to the less advantaged Rwandans both in rural and urban areas, and to improve their economic and social status.
Medical professional liability insurance in Rwanda
Following the enactment of Law No. 49/2012 of 22/01/2013 establishing medical professional liability insurance in Rwanda, concerned stakeholders requested MINECOFIN to hire a team of consultants to conduct a feasibility study on the Medical professional liability insurance in Rwanda. The study was finalized and a final report was produced. The report makes a situational analysis, financial analysis and recommendations in regard to medical professional liability insurance in Rwanda.
Insurance companies will therefore base on the results of this study to propose or set premiums for the concerned parties.
Capital Market Development
Introduction
A capital market is a place in which financial securities are traded by individuals and institutions/organizations. It can be a primary market where initial public offers (IPOs) take place or a secondary market where IPOs are traded subsequently.
Rwanda’s capital market was established in 2011 under the Capital Market Act of 2011, to guide in the development of capital markets. Prior to the establishment of CMA, the Rwanda Capital Market Advisory Council had been established in 2007 to develop the Capital Market in Rwanda, facilitate the trading of debt and equity securities and enable securities transactions, as well as perform regulatory functions over the Rwanda Securities Exchange (RSE).
Players in capital markets can be divided into investors, issuers and intermediaries. The market intermediaries in Rwanda include the Rwanda Stock Exchange, licensed brokers, dealers, and sponsors. The regulator is the Capital Markets Authority.
The law defines capital market instruments as any assets and interest generated by the following instruments: shares, instruments creating or acknowledging indebtedness, Government-owned capital market instruments and certificates representing capital market instruments.
Benefits of investing through the capital market
The following benefits apply both to the primary and secondary markets:
a) Access capital: By issuing shares or debt directly to the public through the RSE private sector businesses and government can raise funds for expansion of existing business or new projects.
b) Discover the value of its business: By listing on the RSE issuers or owners of business are able to discover the price of their securities and therefore the value of their business. This enables them to realize the market worth of their wealth.
c) Raise a company’s visibility and enhance its status with customers and suppliers at home and overseas: A listing on the capital market raises the profile of a company through continuous media coverage. This is free publicity and enhances the product presence of the issuer among its customers.
d) Have better bargaining position with financiers: Increased capitalization of an issuer over time enables the issuer to raise capital at a lower cost due to their improved rating in the market.
e) Enhance management practices: The capital market requires a minimum level of disclosure and corporate Governance and this encourages the quality of management practices.
As per Financial Sector Development Program II (FSDPII), the capital markets legal foundation was virtually completed when the laws and regulations were put in place. Creating a government bond market and yield curve was an important element of capital market development. Therefore government established a regular bond issuance program. The three elements of bond market development was to introduce regular government bond issuances to build a yield curve, broadening the investor base through the growth of contractual savings such as pensions, and promoting private sector bond issuance.
Government Bond
A Treasury Bond/Government bond is a debt instrument issued by a national government through the Central Bank in its capacity of Government agent, generally with a promise to pay periodic interest payments and to repay the face value on the maturity date.
The terms on which a Government can sell bonds depend on how creditworthy the market considers it to be. Government bonds are usually denominated in the country's own currency. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bonds, although the term "sovereign bond" may also refer to bonds issued in a country's own currency.
In a bid to develop the Rwandan bond market, the Government of Rwanda in collaboration with BNR has published its quarterly bond issuance program in February 2014. In this context a 3 year Treasury bond with a face value of FRW 12.5 billion was successfully issued in February 2014.
The intensive mobilization across the country and within the region has increased the participation of individuals, pension and insurance companies, microfinance institutions and regional investors. The transaction was oversubscribed by 140% recorded in 56 applications in contrast of less than 15 bids recorded in average per auction in previous years.
Recently, the Government’s issuance of Rwf 15 billion bond on 27 th August 2014 has been successful with Rwf 34.8 billion as the total amount booked representing a subscription level of 232 percent, the highest ever oversubscription recorded by any Rwandan government bond. The National Bank of Rwanda received 91 bids from different categories of investors compared to 56 in the previous issuance. Retail investors increased to 39 from 29 recorded in February this year. The awareness campaigns were organized in a bid of bringing on board more institutional investors both local and international.
Rwanda’s Eurobond
Kigali Convention Center Project financed by EUROBOND
Eurobonds are bonds issued/traded in a country using a currency other than the one in which the bond is operating. This means that the bond uses a certain currency, but operates outside the jurisdiction of the central bank that issues that currency. This means that, had Rwanda for example issued Rwandan francs bonds on the Nairobi securities exchange (NSE) it would still be a Eurobond. It is therefore, important to note that the term Eurobond has nothing to do with Euro.
On April 25, 2013, Rwanda’s debut 10-year Eurobond went to market with a coupon of 6.625% and an order book of $3.5 billion. The yield was tighter than expected and eight-and-a-half times oversubscribed. The Rwanda government used $120 million of the proceeds on repaying an outstanding loan on the Kigali Conventional Centre, as well as $150 million is financing the completion of the Kigali Convention Centre, another $50 million was earmarked for funding the completion of Nyabarongo hydropower project expected to generate over 28 MW by the end of 2015 and $80 million on retiring RwandAir’s debts.
Rwanda’s Eurobond was named “Deal of the Year” by pre-eminent international finance magazine Euro money. The lead managers on the deal were BNP Paribas and Citi.
Leveraging Capital Markets for SME financing in Rwanda
This study reviews and examines the current legal and regulatory framework to establish the extent to which it facilitates private sector access to capital markets in Rwanda; available literature and data on private sector access to capital markets in Rwanda; and available evidence on what has worked in other countries in Africa and globally including in Asia, Brazil and Israel to provide lessons for Rwanda.
Banking Payment System
The National Financial Education Strategy (NFES)
Since 1998, Rwanda’s national development policies have been guided by Vision 2020 which sets forth the country’s aspiration to transform Rwanda into a middle income country by the year 2020.To contribute to this goal, the Government of Rwanda recognizes the importance of the Financial sector and made the Financial Sector Development Program (FSDP) one of the key components to drive the country.
A crucial component of FSDP II’s plan to increase financial inclusion to 80% by 2017 is the establishment of a National Financial Education Strategy (NFES), aimed at deepening and broadening the financial literacy of Rwandans. The Ministry of Finance and Economic Planning (MINECOFIN) became the lead Government arm in the development of the NFES, with active engagement from the BNR.
Financial education has a key role in not only improving knowledge of personal finance, but also transforming this knowledge into action. It provides the tools for sound money management practices on earning, spending, saving, borrowing and investing. Financial education enables people to take greater advantage of appropriate financial services – both formal and informal that are available to them, and encourages financial behaviors that enhance their overall economic well-being.
The National Financial Education Strategy targets different segments of the population including; children, youth and adults with more emphasis on rural adults and youth.
Financial Sector Strategy
The Rwanda Financial Sector Strategy is a long-term development strategy that governs the entire financial sector of Rwanda. The Strategy focuses on financial inclusiveness driven by Access to Finance as the Government rediscovers the benefits of savings. The particular attention has been to reach out to the remaining underserved Rwandans through fast expansion of private credit which has to be accompanied by saving as a key enabler to finance productive activities.
FinScope Rwanda Survey 2012
FinScope survey is a tool that assesses the levels of access to various financial and other services and is conducted after every four years and funded by FinMark Trust - an independent Trust whose purpose is “making financial markets work for the poor, by promoting financial inclusion and regional financial integration”. In pursuit of its goal of improving the livelihoods of the poor through the usage of financial products and services, FinMark Trust recognizes the complementary role of governments (as policymakers and regulators) and the private sector (as service providers) and believes that the availability of credible financial sector information enables effective, evidence-based dialogue amongst financial sector role players, and that this facilitates the development of effective interventions that are essential for sustainable financial market development.
The first implementation of the FinScope survey Rwanda in 2008 was driven by lack of credible information to guide policy interventions and financial service providers in their efforts to expand the reach and depth of the Rwandan financial system. Consequently, FinScope Rwanda survey 2012 provided insights to guide policy makers and regulators in terms of how to address or respond to some of the challenges confronted in order to meet financial inclusion targets. It also provides financial service providers with crucial strategic information regarding their target markets and the financial services these markets need - enabling them to extend their reach and broaden the range of services they provide. The survey reveals a holistic understanding of how individuals generate an income and how they manage their financial lives. It identifies the factors that drive financial behaviour and those that prevent individuals from using financial products and services.