NAIROBI, Kenya, Feb 25 – In an effort to encourage the growth of venture capital markets in Kenya and East Africa as well as deepen financial markets, the Capital Markets Authority (CMA) is spearheading an initiative to unlock the potential of Small and Medium Enterprises (SMEs).
Speaking during the launch of the CMA East Africa Impact Investing Task Force Report in Nairobi, the CMA Chief Executive Officer Stella Kilonzo, said that the Authority, in collaboration with the Rockefeller Foundation established the Task Force which identified challenges and proposed solutions to help SMEs access funding.
Mrs Kilonzo observed:‘’the Task Force was important in providing insights on the challenges faced by impact investors with a keen interest in early stage ventures in East Africa, an overview of the impact investing opportunities, and propose creative solutions to help overcome the challenges over the medium to long term. We are extremely pleased with the broad policy and regulatory reforms proposed to enhance access to domestic capital.”
Impact investors are an emerging class of venture capitalists, seeking to optimise financial returns while pursuing a positive social/environmental impact.
The CMA Chief Executive explained: “with the significant growth of international venture capital markets, the Authority is taking proactive steps to identifying methods to facilitate venture capital investments in Kenya in line with our mandate of developing capital markets. The capital markets in Kenya and East Africa as a whole offer appealing exit strategies, through IPOs and listing by introduction, for venture capital and private equity investors.”
Mrs Kilonzo said this was in line with the Vision 2030 Economic Blueprint, where the need to mobilise savings by citizens and provide for access to capital by SMEs is important to propel Kenya to middle incom e status by the year 2030.
“To realise this highly ambitious objective, it is important to engage with impact investors who have the capacity to stimulate small companies with huge potential to grow in order to create a conducive environment for the flow of these funds into Kenya. The East African project is in line with the East African Community Common Market Protocol signed in 2010. This also recognises the potential of East Africa’s financial markets,” she said.
SMEs have a high a risk profile, which makes it difficult for them to access traditional sources of credit and finance.
Impact investors, who are focused on facilitating equity investments in high potential small but growing enterprises, are a critical source of capital to fill this financing gap.
Mrs KIlonzo added: ‘’strengthening SMEs in Kenya sits well with the objective of setting up an SME platform on the Nairobi Stock Exchange later this year, as it will help prepare such companies for entry into the capital markets, which offers them additional opportunities for growth by facilitating access to capital. Likewise such companies can participate in raising debt capital through the issuance of bonds even prior to listing.”
The potential of the ICT sector, through SMEs, especially in the mobile technology sector, has been identified as one of the key sectors in need of innovative financing methods in light of its high growth prospects.