Capital markets are essential for funding businesses, ventures, and ideas. There is a strong correlation between a nation’s prosperity and the vibrancy of its capital markets. In short, it’s not just a good thing to have; it’s a must-have if we want to increase funding for businesses and improve our standards of living.
President Ruto’s administration started off with capital markets as a core area of focus. It took important steps that were a good signal. Two specific steps include firing the previous conflicted Capital Market Authority (CMA) board and jumpstarting the capital market tribunal.
These two actions have been very impactful, as we now have a board that is open and approachable to all market participants, not just the connected few and the tribunal is determining matters expeditiously. Consequently, the administration deserves recognition for fulfilling its promise of promoting freedom within capital markets.
Nevertheless, there remains ample room for improvement, as exemplified by recent events such as Fahari’s delisting, an action that is contrary to the President Ruto’s directive to increasing listings. To address these challenges, the following recommendations merit consideration:
- Supplement the good CMA management with people with real market experience. You can’t appropriately regulate and grow what you have never practiced.
- Remove banks as the sole supervisors of capital markets because banking markets and capital markets are supposed to compete, hence banks should not supervise capital markets.
- Address restrictive minimum investment requirements hindering participation in housing investment. Arbitrary thresholds, such as the current KES 5 million minimum, deter potential investors.
- Enable unit trust funds to operate multiple bank collection accounts, facilitating convenience for clients. The current restriction to a single bank account is unnecessary and counterproductive.
- Stop the culture of silencing capital market critics; it only entrenches mediocrity.
- Speed up approval and decision processes.
- Allow for specialty funds to finance sectors such as housing, which is a government priority.
While commendable progress has been made under the current administration, sustained efforts are essential to address existing challenges and realize the full potential of Kenya’s capital markets in driving economic growth and prosperity.
