NAIROBI, Kenya Jul 21 – The Capital Markets Authority (CMA) says regulations for the establishment of a Small and Medium Enterprises segment at the Nairobi Stock Exchange will be complete by October.
This will pave way for the listing of SMEs at the bourse giving smaller companies an alternative avenue from which to source capital.
CMA Chief Executive Officer Stella Kilonzo said on Thursday, that the regulator together with the NSE is holding sensitisation programs with SME players to prepare them for listing.
“We’ve had a joint committee between us, the NSE and the CDSC working on the policy aspect which is complete and we have adopted. Now what is being done is holding discussions with certain SMEs who may interested in listing on the NSE,” Mrs Kilonzo said.
Currently, the NSE has two segments. The Main Investment Market Segment and Alternative Investment Market Segment, whose tough listing requirements have locked out many small companies.
Mrs Kilonzo said requirements for SMEs would be less stringent but insisted the companies would still have to adhere to strict financial reporting standards.
“The requirements will certainly be lower than what we ask of other companies but we are looking at this really being incubation for these companies to eventually graduate to the main investment market,” she 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 controlling stake.
Mrs Kilonzo said with the SME segment in place, the capital markets would want to position itself to support the growth of enterprises.
Among the requirements is that firms will need to meet include being profitable for five years in a row before they are listed.
The small companies will first be placed in the alternative market segment in turn lowering the entry point for listing. Listing for SMEs will also help the companies find out the market values of their companies.
The creation of the new market segment is expected to create vibrancy as well as deepen the country’s capital markets.