NAIROBI, Kenya, Oct 23 – Kenya has retained her position as the third most advanced financial market in the African continent in the latest edition of the Absa Africa Financial Markets Index.
With a score of 65, Kenya’s financial markets depth leads the East African region, followed by Tanzania at 55, Rwanda at 53, Uganda at 52 and Ethiopia at 27.
Of the six pillars, Kenya registered the highest ranking on the legality and enforceability of standard financial markets master agreements space with 96 points, coming a close second to Mauritius with a score of 98 points.
Kenya’s adoption of the Global Master Securities Lending Agreement (GMSLA), which provides a contractual framework for securities lending arrangements, has boosted her standing this year.
The country also scores well for its insolvency law that encourages rehabilitation through administration of companies facing financial difficulty.
However, the country lags its east African peers – Uganda and Rwanda- in Pillar 2 which examines access to foreign exchange and other factors that impact markets’ accessibility to international investors.
While Kenya led in this pillar last year, it has dropped to fifth position after the International Monetary Fund reclassified its exchange rate regime to ‘other managed arrangement’ from ‘floating’.
Kenya also scores dismally on Pillar 4 focusing on the capacity of local investors largely due to a fragmented and small pension funds sector.
However, innovative products like the M-Akiba infrastructure bonds have enabled retail investors access to government-issued bonds through their mobile phones, further broadening investment options and deepening financial inclusion.
On pillar 3 which assesses countries’ regulatory and tax environments for financial markets, the report notes that while Kenya’s tax code is generally supportive, the government has
introduced prohibitive taxes, such as an increased levy on mobile cash transactions which are dampening investors’ moods.
The report further notes that the continued implementation of the interest rate caps, introduced in 2016, has hampered credit creation, weakening companies’ financial bottom line and hindering their expansion plans, negatively impacting their capital issuance.
“As a key player, working with key industry stakeholders, led by the regulators, we have been at the forefront of delivering initiatives that continue to transform our capital markets space. We partnered with the CMA to launch the 10-year Capital Markets Master Plan which is guiding the development of our markets. In addition to this, we were the first financial institution in the region to list an Exchange Traded Fund, the NewGold ETF after the NSE and the Capital Markets Authority enacted regulations allowing these new instruments,” Barclays Bank Kenya Managing Director Jeremy Awori said.