Opportune time for corporate bonds

Kofi Pianim, Head of Stanbic Bank’s Trading Desk, has said launching the Ghana Fixed Income Market (GFIM) should propel institutions, private and public, to list corporate bonds on the Ghana Stock Exchange (GSE) in order to raise long-term capital at cheaper rates.

The GFIM is a new market established by key stakeholders in Ghana’s financial market purposefully for the trading of fixed income and similar securities, as well as bringing secondary trading activities of fixed income securities in Ghana to international best practice standards.

“It is about time that corporate institutions made themselves relevant to the point where they can actually come to the market and raise debt. It is a more efficient option than consistently going to banks,” he said.

Last year, Izwe Loans Limited -- a pan-African financial services group, announced listing of the first cedi-denominated corporate bond when it raised GH¢80million on the Ghana Alternative Market (GAX).

Speaking at the press launch of the GFIM -- which is set to take off officially in July -- Ekow Afedzi, Deputy Managing Director of the GSE, said the main objective of the new market is to provide a fair, orderly, transparent and efficient market.

“The principal functions of GFIM will be to approve the admission of all fixed income securities (including government and corporate) and other similar securities, and to provide a market for the secondary trading of such securities,” he said.

Mr. Pianim therefore called on corporate institutions to raise debt on the exchange because listing a bond will make companies get a real feel of the public perception of their value.

“You also tend to manage your reputational and operational risk better. At the same time, depending on how you perform and satisfy people, you get cheaper funding.”

He noted that due to government’s high borrowing needs, interest on Treasury bills is high, but corporate institutions that list bonds will still get cheaper funds for longer terms than borrowing from banks.

“The auction rate of T-bills is around 25 percent, and with this rate what do you expect banks to lend to you? If risk-free is around 25 percent, what should be the bank’s risk? 30percent? So instead of you borrowing from the banks at 30percent or above, you can find a price in-between.”

The key stakeholders that have collaborated to set up the GFIM include the Bank of Ghana, the GSE, Central Securities Depository Ghana Ltd. (CSD), Ghana Association of Bankers (GAB), ACI Ghana (Association of bank dealers), and Licenced Dealing Members (LDMs) of the GSE.

All Government of Ghana Treasury bills, notes and bonds and Bank of Ghana money market instruments are to be admitted and traded on the GFIM.

In addition, quasi-Government of Ghana institutions’ money market instruments, notes and bonds; corporate notes and bonds; municipal and/or metropolitan bonds; supra-national bonds; repos; and other fixed income or money market securities may be admitted and traded on the GFIM.

A statement issued by the exchange stated that trading on the GFIM will be limited to an entity that is licenced by the Securities and Exchange Commission (SEC) to deal in securities: and in addition authorised by the Bank of Ghana as a primary dealer (PD); or licenced by the Bank of Ghana as a bank; or licenced by the GSE as an LDM.

The Bank of Ghana, for monetary policy purposes, shall be permitted to deal in Government of Ghana and Bank of Ghana securities listed on the GFIM.

The statement added that secondary trading of securities on the GFIM will be by way of an electronic trading and market surveillance system provided by Bloomberg LP, while cash settlement of trades will be done through the Bank of Ghana and securities settlement will be done at the CSD.

The GFIM will be governed by an eleven-member governing committee to be chaired by the first deputy governor of the Bank of Ghana.

There will be representatives from GSE, CSD, GAB, ACI Ghana, the Ghana Securities Industry Association and the Bank of Ghana, and the Debt Management Division of the Ministry of Finance, on the committee.