NAIROBI, Kenya Sep 23 – The Nairobi Stock Exchange (NSE) is looking to create a market segment for Small and Medium Enterprises (SME) to list on the bourse.
The move aims at loosening stringent listing requirements that have seen many small businesses shy away from tapping into the capital markets.
NSE Chief Executive Officer Peter Mwangi said the division, which is expected to be operational in the next twelve months, would give smaller companies an alternative avenue from which to source capital.
“We have the support of all stakeholders as well as the regulators in coming with such a market segment. It clearly makes sense in this economy because the bulk of the GDP and employment comes from this segment,” Mr Mwangi said.
Currently the NSE has two sectors; the Main Investment Market Segment (MIMS) and Alternative Investment Market Segment (AIMS) whose tough listing requirements have locked out many companies.
Mr Mwangi said creating the new segment is an attempt to attract SMEs to the stock exchange since it provides for lower threshold in equity capital.
“We as the Exchange want to position ourselves to support the growth of those enterprises,” Mr Mwangi said.
Difficulties in accessing financing has held back small enterprises from achieving their full potential despite entrepreneurs in the sector emerging as an engine for growth and employment creation in corporate Kenya.
SMEs have been unable to meet numerous minimum requirements such as an asset base of between Sh20 million and Sh100 million, disclosure of company operations to the public as well as a shareholder roll of between 100 and 1,000 people. Firms also have to be profitable for five years in a row before listing.
Many small companies operate as family business units with members holding major shares in them and have been reluctant to cede their controlling stake.
The NSE is also looking to engage the youth more to invest in the stock markets.
Mr Mwangi said there was currently under representation of the segment at the bourse as they opt for other investment avenues.
“We are leaving in an increasingly sophisticated world and people will need to take care of their pension needs and the more awareness we have out there the better for the investor themselves,” he said.
Mr Mwangi said the focus would be to get the group to be aware of good financial practices and investment options available to them.