The role of the discount house in the development of a money market: the case of Rwanda

Abstract

A discount house is a financial institution with the aim of trading of financial instrument on the secondary market. It assists in creation of other money market instruments other than T-bills, like CP, NCD, etc. Discount houses motivate the secondary market of financial instruments that enables borrowers to raise liquidity. The general objective of this study was the analysis of the role of the discount house in the development of a money market in Rwanda. One discount house was the case of study (CDH Rwanda). The researcher used both the primary and the secondary data and open ended questionnaires and guided interviews were used to collect relevant data. Secondary data was collected from published records during the search for relevant literature on the study variables. The main source of the literature was drawn from textbooks, news papers, journals, reports, magazines and internet sources. The collected data were presented, analyzed and interpreted to derive meaningful results. The findings showed that the discount house played a big role in making the money market well developed as shown by statistics and especially making the interbank market very vibrant. In order to maintain the market vibrant, it was recommended that the discount house undertakes a strategic appraisal of their current role in the money market. This institution should be empowered and promoted in Rwanda in order to maintain a sustainable financial market. The regulator should understand the business model because discount houses strive where they have support of the central bank and it is an important tool in the stabilization of the financial market and a source of information on the financial markets