Capital Markets eye billions in SACCO bank accounts

It’s estimated that credit and savings schemes commonly known as Imirenge SACCOs are keeping Frw 15 billion in commercial banks.

CMA says SACCOs can earn more profits from this money if they invested it in stocks (file photo)

Rwanda Capital Markets Authority (CMA) says SACCOs can earn more profits from this money if they invested it in stocks, government bonds and other securities.

CMA told a meeting of over 50 managers of SACCOs from Nyarugenge, Kicukiro and Gatsabo districts last week that investing in shares of listed companies on the Rwanda Stock Exchange, government securities such as treasury bills and bonds, corporate bonds and commercial papers offers better returns than keeping the cash in banks.

“A bond is a debt; so by buying a treasury bond issued by government the SACCOs become lenders and government the borrower. It is the same story if a SACCO bought a bond issued by a company…. The bonds would then earn the SACCOs an interest income periodically,” said Charles Faraha, the CMA legal & corporate manager.

Rwanda bond market is now worth $46.7 million, according to Robert Mathu, the CEO of CMA.

But if governments, which in the past were thought to be immune to bankruptcy, are too proving to be financially unsound (like is the case of Greece and Italy), SACCOs could choose to buy shares in some of the most profitable companies on the stock market not only in Rwanda but also in other economies in the region.

Rwanda stock market is now worth $1.4 billion excluding the debt market and attracting the billions held by SACCOs could be a great boast.

Take the case of Bralirwa. When the beer brewer and soft drink bottlers went public in February 2011, the price of a share was around Frw135 but this has since more than doubled to Frw 300.

“The beauty of investing in stocks is that, it’s a liquid market where share owners can always sell their stake to recover their monies at any time,” said Furaha.

Two local companies—Bralirwa and Bank of Kigali are listed on the Rwanda Stock Exchange. There are also two cross-listed Kenyan companies, Nation Media Group and KCB. About 15 local companies are expected to list within the next three years.

Phony companies is one of the concerns that was raised by SACCO leaders who said it would not be a nice idea to invest members’ money in a company that would fold shortly due to mismanagement.

But according to CMA, they have structured a plan to help SACCOs willing to invest in stocks get full knowledge and capacity of making guided and informed decisions before making investment decisions.

Rwanda stock market is now worth $1.4 billion excluding the debt market and attracting the billions held by SACCOs could be a great boast.

The biggest problem facing Rwanda’s SACCOs is poor management and inadequate financial knowledge to lead and make wise decisions for their institutions.

But CMA, whose target is to attract at least 500,000 people into the stock market within five years says it’s willing to help build capacity of SACCO leaders who will in turn work as ambassadors to teach their own members.

Posted by Kenneth Agutamba on May 28 2012. Filed under Business, Daily News, Other News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.