The capital market can stimulate sustainable development

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The capital market can stimulate sustainable development


Nairobi Stock Exchange trading room. FILE PHOTO | NMG

Summary

  • In Kenya, the private sector has a negative attitude towards listing in the securities market, which limits the attractiveness of the capital market for investors, resulting in a small number of listed companies.
  • The Cabinet Secretary to the Treasury has granted companies a two-year tax amnesty on listing to encourage them to go public.
  • The capital market is a highly specialized and organized financial market and an essential agent of economic growth due to its ability to facilitate and mobilize savings and investment.

The capital market offers a variety of financial instruments that allow economic agents to mutualize, set the price and exchange risks.

In Kenya, the private sector has a negative attitude towards listing in the securities market, which limits the attractiveness of the capital market for investors, resulting in a small number of listed companies.

The Cabinet Secretary to the Treasury has granted companies a two-year tax amnesty on listing to encourage them to go public.

The capital market is a highly specialized and organized financial market and an essential agent of economic growth due to its ability to facilitate and mobilize savings and investment.

The capital market is the main tool that propels any economy on the path of growth and development.

Indeed, it is responsible for long-term growth and capital formation by issuing funds for investment, ensuring effective and efficient allocation of scarce resources for optimum benefits to the economy, reducing dependency corporate sector overreliance on short-term, long-term financing. long-term projects and encourage the influx of foreign capital.

The capital market plays an important role in the economic development of society.

Capital valences could be even more attractive in the case of emerging markets, which are well known for redirecting financial resources towards efficient activities. They contribute not only to economic reforms but also to the privatization process.

The growing importance of capital markets around the world has reinforced the belief that finance is a crucial ingredient for economic growth and the development of stock markets.

The capital market plays an important role in the growth of industries and businesses.

Economic growth depends on an efficient financial sector that pools domestic savings and mobilizes foreign capital for productive investment. Underdeveloped or poorly functioning capital markets are illiquid and expensive, deterring foreign investors.

The capital market allows the contractual savings sector to mobilize the long-term savings of small individual households and channel them into long-term investments.

It performs the function of transferring current purchasing power, in monetary form, from surplus sectors to deficit sectors, in exchange for the repayment of greater purchasing power in the future.

real estate

In this way, the capital market allows companies to raise capital to finance their investment in real estate assets.

The overarching goal of the Big Four agenda and Vision 2030 is to transform Kenya into a middle-income economy by improving its competitiveness while ensuring unity and inclusive growth. The Capital Market Authority is responsible for the development of capital markets and financial markets.

The capital market provides equity capital for the development of infrastructure such as roads, water, sewer, housing, power, telecommunications and public transport, which have strong socio-economic benefits.

Securities markets are important because they play an important role in the economy by channeling investment to where it is needed and putting it to best use.

The securities market is an important alternative source of long-term financing for productive investments. This diffuses stress on the banking system by matching long-term investments with long-term capital.

Securities markets provide a way to raise funds and trade in securities, including futures, options and other derivatives, which provide investors with the opportunity to generate returns.

The implication will be an increase in productivity in the economy, creating more jobs, increasing overall consumption, and therefore growth and development. It allows them to benefit from economic growth and the distribution of wealth while offering them investment opportunities.

Capital markets facilitate the efficient allocation of scarce financial resources by offering a wide variety of financial instruments with different risk and return characteristics.

This competitive pricing of securities and the wide range of financial instruments allow investors to better allocate their funds according to their respective appetites for risk and return, thereby supporting economic growth.

Ndirangu Ngunjiri, Managing Partner Watermark Consultants

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