Malawi Stock Exchange (MSE) has said the country’s economy stands to benefit from issuance of bonds—long-term debt instruments—through, among others, expanded infrastructure and housing and better risk management for borrowers.
The Malawi Government listed three bonds worth K109.2 billion on the 14-counter MSE in December 2014, stirring excitement from the investing public.
Analysts say bonds will not only add to the diversity of listings on the local bourse, but also generate interest of domestic and international investors.
The three bonds include a three-year K107 billion with a coupon (interest) rate of 15 percent to mature in 2017, K1.5 billion four-year bond to mature at the end of this year with a 9.5 percent coupon rate and a five-year K822 million bond to mature in 2016 at a coupon rate of 10 percent.
MSE chief executive officer John Kamanga, speaking on Friday at a capacity building workshop for the Association of Business Journalists (ABJ) with funding from Malawi Communications Regulatory Authority (Macra) at Game Haven Lodge in Bvumbwe said the bonds also have the potential to reduce financing mix and lower interest rates.
“The bonds also ensure financial sector diversification and accelerated private sector development,” he said.
Kamanga defined a bond as debt instrument that requires the issuer (the borrower) to repay the bondholder (the lender or investor) the amount borrowed as well as interest over a specified period of time.
There are a number of bonds and some of them include government or sovereign bonds, which are issued by governments to raise money to carry out its spending policies, building works, infrastructure development; municipal bonds, issued by local governments and commercial bonds by corporate entities.
Kamanga said he has had talks with officials of Blantyre City Council on the possibility of issuing a municipal bond as is the case in other countries such as South Africa to spur infrastructure development in the city.
Market analysts have said since listing of three government bonds, the reaction has been on the demand side, which means that those holding them are not willing to sell.
With an affordable standard lot size, bonds also provide an avenue for retail investors to have access to the bond market, offering investors an additional investment alternative as well as an opportunity to diversify their investment into more asset classes.
Minister of Information, Culture and Tourism Kondwani Nankhumwa opened the training workshop and urged business journalists to uplift standards of business reporting.