The Capital Markets Authority plans to list the first Small and Medium Enterprises on the Rwanda Stock Exchange by December this year.The development, according to analysts will allow the small businesses which dominate the Rwandan economy to raise the much needed capital and start engaging in corporate business practices.
When they list, analysts point out that they will also be spreading out their risk compared with when SMEs are run as family business or sole enterprises which makes them highly vulnerable to failure.
To accommodate the SMEs, the regulator of the industry has to relax the regulatory systems. For instance, there is no limitation on the required net asset base and on track record.
Mr Robert Mathu, executive director Capital Markets Authority said, “Small and Medium Enterprises are the back-bone of Rwanda’s industrial and business base however they are starved of much needed capital for growth.”
“We expect the first two SMES to list before the year ends,” said Robert Mathu, executive director Capital Markets Authority.
“Nine in every 10 SMEs in the world fail partly because they do not practice good corporate governance,” explained Mr Mathu.
Celestine Rwabakumba, co-ordinator Rwanda Stock Exchange (RSE) said the regulation accommodating SMEs also allows a company that has been in existence for less than a year to raise capital through the market.
On the supply side, Rwabukumba explained that there is a perception that SMEs are risky and associated with higher per unit transaction costs relative to the low value loans required.
Indeed, most of them lack good corporate practices and do not have capacity in project management, general management, human resources and accounting.
Thus, 90 per cent of SMEs fail in their infancy yet it is the SME sector expected to provide the momentum to Rwanda as it positions itself to become a middle income economy.
Source:The Eastern African