Kenya: Low interest among SMEs in SE listing worrying

0

Kenya’s financial markets regulator on Wednesday decried the low interest among Small and Medium Enterprises (SME) in listing on the Nairobi Securities Exchange (NSE)SME
Capital Markets Authority (CMA) Acting Director of Regulatory Policy and Strategy Luke Ombara told a media briefing in Nairobi that so far only four firms have listed on the Growth Emerging Market Segment (GEMS) since 2013.
“We are optimistic that more firms will list once they become are aware of the benefits,” Ombara said during a workshop on the participation of SME’s in the capital markets.
In order to be eligible to list at the GEMS, SME’s need a minimum paid up share capital of 109,000 U.S. dollars.
CMA’s Master plan has set a target of at least three new listings on GEMS each year with the hope of a total of 16 listings by the end of 2016. Ombara said many owners of SME’s fear ceding control of their companies to outsiders.
“However, firms are only required to free float a minimum of 15 percent of their shareholding at the NSE. Disclosure requirements are also less stringent compared to listing at the main Nairobi Securities Exchange (NSE) segment,” he said.
SME’s are also required by law to appoint a nominated advisor (NOMAD) to guide the company to meet the NSE’s listing requirements so that its submissions and structures are compliant.
NSE Chief Executive Officer Geoffrey Odundo said that experience from other nations has indicated that the listing at the GEMS segment normally takes a while before it picks up.
Odundo said more and more SME does will seize the opportunities that capital markets offer.
CMA Acting Chief Executive Officer Paul Muthaura said that the number of firms listed at the securities exchange is little compared to the size of Kenya’s economy.
He said the capital markets offers cheaper long term finance for SME’s compared to commercial banks. He added that small firms play a big role in Kenya’s economy.
“Estimates indicate that SME’s provide over 70 percent of the employment opportunities and contribute to over 40 percent of the Gross Domestic Product,” he said.
Mauthaura added that capital market also play a big role in mobilizing savings as well as allocating resources to the most productive sectors of the economy.
CMA, Financial Sector Deepening Trust (FSD) Kenya, and the NSE engaged Genesis Analytics and Bourse Consult to review Kenyans GEMS in order to identify ways of increasing the number of listings.
Genesis Analytics and Bourse Consult Manager Mauro Mela said that most SMEs in Kenya finance their operations through informal and short -term bank credit.
Mela said despite the fact that the capital markets offer cheaper source of finance, the key reason why SME’s list on NSE is to raise the profile of their businesses.
He noted that the biggest challenge facing SME’s who want to be listed at the capital market is the time and cost required to meet the accounting reporting standards of the NSE.
He added that the level of awareness of existence of the GEMS among prospective companies is very limited.
According to Mela, many SME markets have performed because they were too inflexible by focusing excessively on a specific sector or insisting on excessive entry requirements.
FSD Kenya Head of Inclusive Growth James Kashangaki said that the growth of SME’s represents the best hope for redistributing income in Kenya.
According to Kashangaki, capital markets offer small firms an avenue to grow and join the ranks of big firms.
He said Kenya needs to streamline its regulatory standards so as to make it easier for SME’s to raise funds from the capital markets. Enditem

Source: Xinhua

Send your news stories to [email protected] Follow News Ghana on Google News

LEAVE A REPLY

Please enter your comment!
Please enter your name here