Local savings institutions are one of the rising forces in African capital markets and we are interested in learning more about them. Here is some information from Kigali, Rwanda. Do you agree that savings and credit cooperatives should be investing in equity markets?
Rwanda’s Savings and Credit Cooperatives (known as SACCOs) are being encouraged to take more interest in the capital market. A meeting organized by the Capital Markets Authority in Kigali attracted over 50 managers and leaders of several SACCOs in May, according to a story in local media including East African Business Week.
SACCOs are estimated to hold deposits worth over RWF15 billion (US$24.7 million). The CMA suggested they could get better returns for their members’ money compared to investing in deposits at commercial banks, but acknowledged they needed more knowledge of financial investment and there are not enough investment opportunities. It was suggested they could purchase shares in companies listed on the Rwanda Stock Exchange – Bank of Kigali and brewer BRALIRWA are the local listings, or in government securities such as treasury bills and bonds or corporate bonds or commercial paper. BRALIRWA listed in February 2011 and the share price has since more than doubled, and BoK listed last August after raising US$34.8m.
Charles Furaha, the Legal & Corporate Manager at the CMA, was reported as saying:”We want to interest SACCO leaders in the advantages of investing in capital markets as a way of maximizing benefits for their members whose deposits are tucked away in banks.”
Robert Mathu, Executive Director at the CMA, was reported saying that the Rwanda bond market has a total worth of $46.7m. If investors were worried about government bonds after the bad news from Europe, they should think about shares, not only the Rwandan companies but also companies throughout the East African region.
At least 220 SACCOs had been fully licensed in Rwanda to grant loans by 31 January 2012.
A previous article in the local media reported that the Government launched Umurenge SACCO in all districts of the country in November 2011. It is a legal entity which is a cooperative and individuals invest their money and get loans to invest in farming, trade, basic needs and other purposes. Damien Mugabo, the director general of Rwanda Cooperative Agency (RCA), was reported last November that 1.3m peo¬ple are members of Umurenge SACCO country wide. Government started thinking about it in 2008 after a study showed that 52% of Rwandans had no access to formal financial services and were saving money in holes and other unsafe places. Mugabo said: “Umurenge SAC¬COs reach out to members and areas that are unattractive to banks, they can provide access to members of the population who would not normally save in the formal sector and physically not access a classic financial institu¬tion, due to locality and deposit restrictions.”
He added that many people had bad experiences in 2006 with micro-finance institutions (COOPECS) that were mushrooming but were bady managed. Umurenge SACCOs had been making good progress since 2009.