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Kenya mulls reforms to boost uptake of capital market products

NAIROBI (Xinhua) -- Kenya is considering implementing a series of legal and regulatory frameworks that will boost uptake of capital market products, a financial industry regulator said on Friday.

Paul Muthaura, the CEO of the Capital Market Authority (CMA), told Xinhua in Nairobi that over the past four years only four companies have listed on the Nairobi Securities Exchange (NSE) with the last one being in 2016.

“In order to spur the uptake of capital market instruments, we are seeking to put in place reforms to lower requirements while ensuring that investors are protected,” Muthaura said during the launch of the Excellence in Financial Reporting Awards 2018 edition.

The awards will be focusing on enhancing confidence in capital markets by deepening best corporate governance practices in the region.

Muthaura said the government is concerned about the low uptake of capital products despite the need in the economy for long term finance by both government and the private sector.

The CMA will partner with the NSE as well as market participants to address the gaps that exist that lock out corporates from using the capital markets to raise capital.

Muthaura said the reforms will enable riskier companies to list at the exchange but only allow sophisticated investors who have expertise to invest in the firms.

According to the CMA CEO, there is a big awareness gap as regards the time it takes for firms to list at the bourse.

He noted that an application to join list capital market products could be approved in a period of 25 days or less if all conditions are met.

“We are therefore going to enhance our sensitization campaign among market participants such as accountants, stock brokers and investment bankers to ensure that the firms meet requirements before they make applications,” he said.

He revealed that firms often have to improve their governance structures and financial reporting systems before they can allowed to join the NSE in order to protect consumers.

In 2013, the NSE introduced the Growth Enterprise and Market Segment (GEMS) to attract more Small and Medium Enterprises to list the bourse.

“However only four companies have listed at the GEMS despite the incentives that we have rolled out,” he said.

The capital markets regulator hopes that the new reforms will ensure that small firms entry into the capital markets is fast tracked.

Muthaura noted that most of the companies that have been listed in the past four have not made impressive returns for investors.

“This has not provided an incentive for other firms to use the capital markets to raise finance,” he noted. 


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