There is a need for Kenya to reform her financial markets to make them more attractive for investors after the country dropped 4 positions to position 7 in this year’s Africa Financial Markets Index by Absa Bank that was anchored on 6 pillars.
The pillars were Market depth, Access to foreign exchange, market transparency, tax, and regulatory environment, Capacity of local investors, macroeconomic opportunity, Enforceability of financial contracts, collateral positions, and insolvency frameworks.
According to the Index, Kenya’s financial market attractiveness dropped to the 7th positions, 4 places down from 2019, and 7 points down from 2019.
Kenya ranked 5th on the Market Depth pillar. The country also ranked 10th on the Access to Foreign Exchange pillar, placed 9th in Market Transparency, Tax, and Regulatory Environment index. The country came in 9th on the Capacity of Local Investors pillar.
Kenya’s financial market is also ranked 11th in Macroeconomic opportunity pillar and 6th position on Standard financial markets master agreements.
“Kenya took a few steps backward due to a faster pace by other markets such as Uganda and Ghana whose steps in opening up their financial markets were bolder,” said Victor Nkiiri-Senior Capital Markets Specialist, FSD Africa.
Kenya’s economy has also been affected by the Covid-19 pandemic that is sweeping across the globe. Mr. Jeremy Awori, the CEO of Absa Bank Kenya says that Kenya still has a chance to rejuvenate and catch up with other markets. “Things have not been easy but there is hope,” he said.
“What Kenya can achieve in the shortest time to improve its financial markets including building a primary dealership in government securities. This move will trigger the growth of the repo and derivatives market,” said George Asante-Head of Global Markets, Absa Regional Operations- ABSA.
Experts maintain that Kenya’s primary dealership market in government securities will not work without a properly functioning money market.
“The money market is a key component and a nurturing womb for any financial market that ensures cash is priced appropriately,” said Nkiiri during the webinar panel discussion.