Top 7 Most Popular Financial Products in West Africa

September 22, 2021 | by: David Kodjani

Financial income essentially represents the interest on the various investments made with the cash surpluses of a company during its financial year.

These investments are made by investors in the form of various financial elements, such as shares, negotiable debt securities, marketable securities ...

Here is for you a list of the most used financial products in West Africa

  • Bond

Bonds are negotiable debt securities (TCN), used by companies or governments to borrow money on the financial markets. TCNs are therefore financial securities issued at the option of the issuer, negotiable on a regulated market or over-the-counter, each of which represents a debt right for a fixed period.

By buying bonds, you receive interest as remuneration for this loan, known as the "coupon", and at the scheduled term, the issuer pays you back the amount borrowed. During their lifespan, bonds are listed on the stock exchange which allows you to resell them before their maturity or to buy others during their lifetime. There are many categories with very variable characteristics.

Direct subscribers of Treasury bonds, namely credit institutions, regional financial organizations and Management and Intermediation companies, bid at least 100 bonds. The minimum amount of direct subscriptions from SVTs is specified by an instruction from the BCEAO. Other investors who subscribe to treasury bonds on the primary market through credit institutions and SGIs can bid for one or more treasury bonds.

  • Stock

A stock is simply a share of the ownership of a company. The action represents a right to the asset and the profit. The more shares you buy, the more interest you have in the company. A share is thus a part of the share capital of the company which issued it.

As such, it confers rights. The value of shares varies depending on many factors. When you own shares in a company, it means that you are one of its many owners (shareholders) and as such you have a right (usually very small) in everything that belongs to the company. Technically, you own a tiny fraction of every piece of furniture, every trademark, and every contract in the business.

As the owner, you are entitled to your share of the profit of the company and you hold any voting rights associated with the shares.

  • An Option

An option is a contract which gives its holder the right (and not the obligation) to buy or sell an underlying asset at a price and on a date determined in advance. Unlike a stock or a bond, an option only exists in relation to its underlying. An option is therefore a so-called "derivative" financial product.

Options make it possible to invest in a large number of underlying assets and therefore several asset classes such as equities, stock market indices, commodities, etc. It is a contract between two parties, with precise and defined rules, which makes it possible to seize opportunities on the financial markets, whether they are bullish, stable or bearish.

They look like futures or futures contracts, but unlike these products, the option allows you to buy the underlying asset without obligation. You are not required to buy it if it is unfavorable to you.

  • Treasury bill

A treasury bill is a debt instrument issued by the government and repayable at maturity. Treasury bills are bonds (i.e. debt securities) issued by the State, through the intermediary of the Public Treasury (hence their name).

The buyer of a Treasury bill therefore finds himself a creditor of the State. The State then undertakes to reimburse the buyer at a specific date, and to pay him regular interest before this deadline.

  • Swap

A swap is an exchange between two parties, a kind of credit cross granted for a period fixed from the start, from a few days to a few months or years. This exchange allows counterparties to exchange a series of future flows.

Swaps are therefore financial derivative products, the value of which depends on that of the underlying. They are used for hedging purposes or for speculating, for example in the currency market. The underlyings are very varied: interest rates, currencies, inflation, etc.

  • The reverse repurchase agreement

The reverse repurchase agreement is an operation by which an assignee receives from a transferor instruments or securities by means of a loan of remunerated liquidity. The reverse repurchase agreement, which is regularly requested on the financial markets by professional players, makes it possible to back up a cash loan / borrowing with the delivery of securities.

  • Asset backed title.

An asset-backed security (ABS) or "asset backed security" is a transferable security whose flows are based on those of an asset or a portfolio of assets. Securitization is the main vehicle for creating these assets. The flows can for example be based on those of a portfolio of mortgages, bank card payments, trade receivables. One of the most common forms of securitization is ABS.

In terms of regulation, UMOA-Titres (UT) is the reference agency which provides assistance to Member States to mobilize on the capital markets the resources necessary to finance their economic development policies, at controlled costs. .

This regional support agency for the issuance and management of public securities of the States of the WAMU was set up by the Governor of the BCEAO under the authorization of the Council of Ministers of the WAMU and in the form of '' an international public establishment endowed with legal personality and financial autonomy.

As part of the modernization of the financing instruments of the Union's economies, the financial markets have been identified by the Union's authorities as a source of development financing to be favored. This decision established the regional financial market as one of the main sources of financing the growing needs of WAEMU member states.

Therefore having legal personality, UT has put in place texts that regulate these financial products that we have listed.

Source: UMOA-Titles

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