Question: During the launch of the SMEM platform, it was announced that over 10 small-and-medium enterprises (SMEs) had expressed interest to list on the alternative market segment. However, we have in the two years seen SMEs faltering along the way despite regulations for listing being eased. What has changed now that addresses some of the challenges that would small firms to back out?

ED Eric Bundugu: Following the CMA’s publication of capital market disclosure guidelines for the public offer of securities for SMEs and as a result of continuous targeted education and awareness programs that have been conducted by the RSE in collaboration with the CMA and licensed market intermediaries, the change is happening at two fronts – SMEs now understanding the importance and benefits to raise long term capital through the capital markets and RSE – promoting the SMEM platform as an entry point in the stock market as a way of gearing up efforts to bring SMEs on board.

Next step will be to provide guidance to committed SMEs, by letting them know the appropriate route to take and handholding them along the process. SMEs will be helped in the process of developing their business to the point where they are able to access adequate long term capital for their business development/expansion needs. Helping them to understand the benefits of doing so and have a need for external finance will be done through technical assistance provided to committed SMEs, for example.

Question: How can African financial markets, including Rwanda Stock Market (RSE) compete in a global stage?

ED Eric Bundugu: They should provide appropriate business solutions to both the demand and supply sides of markets; from businesses looking for capital for their expansion to the investors looking into safe investment channels to maximize return of their savings. Product development, an effective legal and regulatory framework and investor protection remain key business components to focus on by all relevant players within the eco-system of African financial markets.

A focus on increasing access to long-term and cheaper financing for businesses, directly or indirectly, is inevitable.  Understanding business models and priorities of firms in need of long-term capital while nurturing an enabling environment to facilitate that remain key to tailor product development accordingly.

As several studies have converged on access to finance being among the most significant constraints to private sector development in middle-income economies, demystifying the process of accessing capital through the stock markets remain a priority business function of not only the RSE and market intermediaries but also regulators.

Question: Some of the issues to be discussed at the forthcoming 7th edition of the Building African Financial Markets seminar in Nairobi, include leveraging technology in risk management and regulation of stock markets on the continent; as well as green finance. How relevant are they or how do they apply to the Rwandan capital market situation?

ED Eric Bundugu: They are very relevant to Rwandan capital markets situation. Leveraging technology in risk management and regulation of stock markets in Rwanda and Africa is not only a necessity but it the way to go.

As much as FinTechs are disrupting the banking and financial sector in general, the capital markets are not left behind. Embracing new technologies is one of the priorities of the CMA in both making use of them in regulation and investor protection but also creating an enabling environment that will adapt innovation and creativity within the market. One example is a rapidly growing sector of alternative finance “crowdfunding”. As much as there are specific risks to address across online crowdfunding platforms, adopting new technologies is key to enable such new initiatives tin informing policy and regulatory development outlook.

Question: Some players say the delay in automating RSE trading activities has in a way affected the growth of the local capital market. What is your take on this?

ED Eric Bundugu: Not necessarily. What the market has achieved since inception (10 years today) is based on concerted efforts of policy makers (the Government), the regulator together with market players. We did not necessarily had to wait to have a fully automated or perfect RSE trading system, we had to use the resources we had and this worked for us. The trading activities at the exchange are not fully automated but currently payment, clearing and settlement operations are automated. Issuance and management of securities certificates is also in soft form through the central securities depository (CSD) system housed at the Central Bank.

To-date achievements include a comprehensive legal and regulatory framework supporting issuance of various capital market products, issuance and trading of diverse capital markets products (equities and bonds) with 8 listed companies (4 domestic and 4 cross-listing), 2 corporate bonds and a quarterly issuance program by the Government of Treasury bonds. RSE market capitalization today stands at USD 3.4 billion (RwF 3 trillion).

However, we believe into benefits of a fully automated business hence RSE currently being in the process of fully automating its trading platform, to benefit from effectiveness and efficiency in its operations. Automation is schedule to also be rolled out at other market players places, for the entire industry to fully reap its benefits as we work together to develop the market.

Question: Tell us about the implementation of the Rwanda’s Capital Markets Master Plan (CMMP) 10-year development plan and what inspired its development/drafting?

ED Eric Bundugu: This is a 10-year development strategy of the capital markets industry in Rwanda. As our economy is also in need of capital market finance, the CMMP sets out the steps which the Government of Rwanda intends to undertake, over a ten-year time horizon, in order to exploit the tools of capital market finance to unleash the full potential of the economy and to enable Rwanda to play its role as a financial hub within the East Africa. The CMMP development was complete but it is not yet a public document as it is undergoing its approval process.

What inspired its development was to make capital markets (i) work for Rwanda and (ii) an enabler of the GoR Vision 2050.

Question: Some analysts are wondering whether African commodities exchanges actually serving their purpose. Others say that commodities exchanges on the continent are out of touch with key stakeholders and, hence rendering them ineffectual. What is your take on such views, especially in relation with EAX?

ED Eric Bundugu: I remain optimistic on the importance and value African commodities exchange bring to our economies in Africa. If they are out of touch with key stakeholders in some places, this should be corrected with an aggressive and systematic public education and awareness campaign to all relevant stakeholders, to ensure they understand the benefits of commodities exchange and work together towards creating environment that would enable commodities exchange fulfils their mandates.

In relation to EAX, I believe they are doing a good job that will lead to benefit producers and purchasers of commodities in having greater price transparency as well as the ability to trade with counterparties across Rwanda, the East Africa region and international markets. Our economy will for sure reap benefits out of such initiatives. Better access to price information and achieving greater economies of scale in the market infrastructure are some benefits that the EAX is expected to provide. The CMA will continue to provide its support to the EAX and the commodities exchange market eco-system players towards achieving their intended business objectives.