Monday, July 23, 2012

Rwanda Bonds

Among the things the State of Israel has done that Rwanda should consider emulating is a foreign-investor bond program. 

The way Israel bonds works is like this:  an individual buys a "bond", which means that the individual is leading Israel money in exchange for a promise of return during the period until the invididual's money is returned.  So, for a $100 bond, the idea is that you pay today, say, $82 and after six years you can exchange it for $100.  From Israel's perspective, it get financing for worth-while projects; the individual-investor knows he'll get some investment return, maybe less than he might have received in a commercial bond, but he or she can rationale the lost "opportunity costs" (that is, the smaller return from the Israel bond than what he might have received from a private corporate bond, by saying that this is essential a financial contribution to the State of Israel.

The American Jewish community has responded by using Israel bonds as gifts for bar and bat mitzvah, high school gradualtion, birth of a baby, or the like.  Separately, individuals use the purchase of larger denominated bonds as an element of a diversified investment portfolio (and conconitantly, an element of a diversified charitable giving portfolio). 

For Rwanda, the large community that lives today outside of the country might well be willing to put some of their "savings" into Rwanda bonds.  They might give them as gifts.

Moreover, I can imagine giving a combined Israel bond/Rwanda bonda instrument as a gift.  This could be developed as a single dual-sovereign bond whereby perhaps a small percentage of the other governmnet's risk of default is assumed by the other.  But the key would be the marketing advantage and how this would foster stronger ties between Israel and Rwanda and Jews and Rwanda.  Moreover, the large american Christian community that has proven so supportive of Rwanda over last dozen years or more likewise may be interested in buying either Rwanda or Rwanda/Israel bonds.

For American Jews who have participated in the purchase of Israel bonds, the reception and satisfaction has been uniform positive and welcoming.  Like Israel was when the bond program was developed, Rwanda is an emerging county with many viable projects it can use to build its future.

1 comment:

  1. Rwanda has created a sovereign fund, where contributions are made. This is a good start, but the difference is that the fund requests gifts rater than loans as in bonds.