An Overview of the Capital Markets Sector in Kenya by Paul Murithi Muthaura

Paul Murithi Muthaura, Chief Executive of Capital Markets Authority, gives an overview of the capital markets sector in Kenya.

“Capital markets in Kenya, although not that large, are actually among the oldest in the continent. While the Nairobi Securities Exchange has officially been in place since 1954, informal trading on the exchange has been conducted in Kenya since 1920, through a link with the London Stock Exchange. So, we are fairly old capital markets, but I believe that we continue to very aggressively try to look for ways to deepen and grow them. We currently have around 65 listed companies and a market capitalisation in the order of USD 25 billion. When we compare this to GDP, we are still a little below 50% of national GDP, so we see that there is significant upward room for growth and development. We have a fairly developed bond market, where the government has been a very active issuer since the mid-90s, and corporate issuance has also become quite common, at least from the early to mid-00s. Most of the country’s financial institutions, both banking and insurance, have been either repeat or significant issuers, especially in dealing with convergence towards rising capital requirements, as we strengthen overall banking and insurance sectors oversight in the country. We have also seen very positive engagement from the infrastructure sector, where the electricity-generating company has for instance been among the most consistent and significant capital raisers in the market. There is also the country’s largest mobile network operator, Safaricom, which is both listed and has also issued a number of bonds to the market, which draws a very strong link between capital markets and the funding of long-term infrastructure development. We have seen something similar at work in the housing sector, with the Housing Finance Corporation also being a regular issuer. Therefore, we have certainly been able to position capital markets as being a proactive and effective tool in supporting the country’s long-term financial and economic growth. But we continue to work with many companies with listing potential, especially considering the SME sector, in terms of how these small to medium sized enterprises can better understand how they can diversify away from traditional bank-based financing and look towards public financing, and how this can support not only their more effective financing, but also strengthen their governance environment, unlock long-term transparency and independence in how they run their businesses”, says Paul Murithi Muthaura.