Rwanda Capital Markets Authority has a new policy that allows the bourse to issue and trade in multiple currencies rather than in the Rwandan franc, as the case has been, to attract and access foreign capital.

The Multicurrency Denominated Securities Market Segment (MDS), an initiative of the Rwanda Stock Exchange (RSE) allowed by the National Bank of Rwanda, exempts some businesses to transact in dollars without special permission.

These include real estate firms with Rwanda Development Board certificates, tourism businesses, and Kigali International Financial Centre and other entities.

The policy helps enforce strict rules against unauthorised dollar transactions this aimed at controlling foreign exchange flows and stabilise the franc.

Doreen Makumi, director of communication National Bank of Rwanda, said the multicurrency policy is different from regulations the central bank set for other business transactions.

But some experts say that with the new policy, foreign investors trading in franc-denominated assets are exposed to the risk of the franc depreciating against their home currencies.

If the franc weakens, the returns on their investment will be lower, even if the underlying investment performed well in local terms. This risk can deter international participation.

Traditionally, Rwanda’s foreign exchange would come from exports, remittances and foreign investments while the capital markets have played a role, given their potential to mobilise foreign currency through such multicurrency trading.

At the request of the issuers, the RSE will allow securities that are denominated in foreign currencies to be traded in their underlying primary currency, which is the currency in which the security is issued and in the local currency.“It is expected that the introduction of multicurrency trading will boost trading and liquidity in foreign currency-denominated securities that are listed on RSE, thereby enhancing the attractiveness of RSE as a listing and trading platform for these securities,” said David Mitali, RSE’s head of Risk and Compliance.

Market statistics will include quotes for both security codes. Corporate actions, such as dividend distribution, will always be given in the primary currency of the listed company.

A small number of foreign investors participating on the stock market can reduce trading activity and overall market liquidity. With the new multicurrency trading approach, it could increase foreign investor appetite on the Rwandan market boosting trading activity and the economy.

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