The Kenyan government should put up more regulations to support capital markets and encourage more players in the field Cytonn Investments, an independent investments management firm says.

The independent investments management firm also says that the government needed to encourage more players in the field.

“Capital markets influence economic growth by providing the capital that is required for investment in the real economy.  It is also important that the issuers together with the Regulatory bodies ensure that proper products are put out in the market to ensure that all issued products get back to the investors what was truly promised,” the firm says in its topical discussion ‘The Role of Kenya’s Capital Markets on Economic Growth’.

The firm further emphasises on the need for the public to spend more time understanding the capital markets and how they operate and only invest where they fully understand.

“Most of the investments in the Capital Markets are long term in nature and it is therefore important that all the players actually understand the products that are offered in the markets before either issuing them to raise funds and also before buying into them.”

Some of the recommendations the firm proposes include: 

Innovative Financial Products and Services: In order to deepen the capital markets and provide alternative platforms for investors, it is imperative that more sophisticated products and value-adding services are created.

This should be in line with technology advancements, investor education and accompanied by the necessary regulatory policies and supervisory frameworks to support their growth. In addition, the capital markets should introduce more technological innovations to make it more efficient.

This can be borrowed from other developed capital markets like the South African Reserve Bank that has set up an electronic trading platform for primary dealers in an effort to improve liquidity and transparency in the government bond market,

Embracing Structured Products in the Kenyan Market: The investing public should spend time and understand the structured products and participate in those that they can tolerate the risk and they understand the returns.

Products which respond to falling or rising markets in periods of high or low volatility will be available as structured products are flexible and can be tailored to meet individual investment needs,

Tax Amendments and favourable regulations: To provide an incentive to issuers so that they invest in capital markets, structured Products and non-bank funding need to be given favourable tax treatment and favourable issuing securities,

Amendments in the regulatory frameworks: The capital markets should adopt regulations that allow market players to craft their products within the general principles, balance the cost and profit margins as well as diversify risks. 

In return, this will lead to innovations resulting in deepened and developed capital markets. The authority should also develop policies which will require listed firms to disclose corporate news and price-sensitive information to the bourse before going to the media. 

This will improve market access and efficiency seeing that in order to achieve efficiency, high quality and timely information is required. This is derived from better disclosures by listed companies.