In the new proposal, stockbrokers at the Rwanda Stock Exchange (RSE) could be required to raise their minimum capital by 900% to Rf100million (US$168,634) from the current Rf10 million ($16,863) , according to CMA Executive Director Mr. Robert Mathu.
"This is basically capital requirement that came up as a result of the discussions on the licensing of stockbrokers in Rwanda," said Mr.Mathu.
He said that the regulator is still discussing the proposal with the association of stockbrokers and a new capital figure could be set over the next two months.
However, stockbrokers have welcomed the proposal with concerns saying that it could knock them out of business.
"Investing a hundred million when you have a turnover of less than a hundred million doesn't make sense," said Simon Kalenzi, who chairs the association of stockbrokers.
Mr. Kalenzi, who doubles as the CEO of Dyer& Blair, one of brokerage firms at RSE urges that the market is still small with few products to sustain the licensed brokerage firms.
"The industry is young. We have few products and there are eight of us so we are not objecting to the capital being increased but it should be done gradually."
Putting them on the equal footing with their counterparts in Kenya, Tanzania and Uganda, Mr. Kalenzi urged that this should be done when the market is developed.
"Nairobi [Stock Exchange] is over 50 years old; Uganda [securities exchange] is over ten...they also started low so we can't match them at this time when we have only two products."
However, Mr. Mathu said that if Rwanda allows brokers to operate with lower capital compared others in the region, with regional integration, they would be regarded less competitive once they cross to operate in other East African markets.
Mathu said that Rwanda's current capital requirement was benchmarked against the regional practice but it is higher than that of Uganda and much lower than that of Kenya.
Although being a good broker does not require huge capital, it requires understanding of the market and advising the customer appropriately, Mr Mathu said that capital requirement is a tradition that cannot be ignored.
Rwanda launched an over the counter (OTC) market for bonds on January 31, 2008 upgraded to a fully-fledged stock market on the same date 2011. Currently, there two local companies-Bralirwa and Bank of Kigali and two Kenyan companies- Nation Media Group and Kenya Commercial Bank listed on RSE.
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written by Richard Rwogera, UK, October 04, 2011
The Rwanda Stock Exchange has been gradually developing with new listings this year, and this is great to see. The call for the increase of capital requirement for the stockbrokers by almost 900% is a little bit insensitive by the CMA as most these companies are still young in an industry that is still in its infancy stage. I agree with Mr. Kalenzi that increase in the basic requirements should be gradual and also pragmatic, and caution because most the brokerage firms will easily fall out of business.
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