By Rita Nyaga
KENYA: The Financial Sector Deepening-FSD Africa Biennial Sustainable Capital Markets Conference kicked off on 5th November 2024. This prestigious event convened Africa’s leading industry figures to engage in discussions and insights on domestic capital mobilisation, highlighting FSD Africa’s innovative approaches and impactful interventions in the region’s capital markets.
The 2024 conference spotlighted FSD Africa’s efforts in strengthening African capital markets, fostering sustainable development, and mobilising domestic capital to address key economic challenges. One of the key high lights was Insights into FSD Africa’s capital markets initiatives and the measurable impacts of FSD collaborations across Africa.
Francis Mwiti, the Chief Executive Officer of the Nairobi Securities Exchange was present at the conference, and he shed light on the benefit of investor confidence in stock and security exchanges
Kindly give me a brief background about yourself and your career history.
My name is Frank Mwiti, l am the Chief Executive Officer (CEO) of the Nairobi Securities Exchange (NSE). The NSE has been in existence for quite a while, in fact we are over 70 years old now. We trade in different products like equity, fixed income, derivatives, structured products, ETFs and things like these.
From a career perspective, l’ve been in the investment banking, capital markets and advisory space for over 23 years now. The bulk of that time, about 15 years, l was based in London, United Kingdom. I moved back to Kenya in June 2019, and l took up my current role in May 2024.
In Kenya, investors have become very confident in the NSE, what would you attribute this to? This confidence?
You’re right that the performance of the NSE has been quite good, at least in the recent past and there are different drivers for that. The first thing to mention is that we’ve had to do several updates or reforms in collaboration with the Capital Markets Authority of Kenya (CMA), to enable investors to more readily access our market and of course trade and invest in our market.
Secondly, Kenya’s economy has also been doing ok. That tells you that these investors are more confident of the outlook for the Country and the companies that are listed and traded on our exchange, and therefore that also contributes to the higher trading volumes that we’re seeing at the exchange.
And the last one is that we’ve also been doing quite a lot of work to educate the market about how the exchange works, how the opportunities look like, and how to access them. The NSE is also working with the listed companies for them to put out more information so that potential investors can take that information, understand it and of course use that to make investment decisions.
There are some new words that we’re hearing about, green bonds and women bonds tell us what this entails ?
Yes. So, around the world, there is a big push for sustainability as a theme and for markets like ours to provide opportunities for investors to invest in sustainability linked opportunities or Environment, Social and Governance (ESG) linked opportunities. So, the reason you’re seeing more issuance of things like green bonds, gender bonds, social bonds and climate bonds is because on one hand there’s demand from investors for these types of instruments, that they can invest in because they align with sustainability and ESG themes.
On the other hand, it is an alternative way for owners of business or owners of projects to access funding for their businesses. That area is going to grow and grow, there’s every indication that that will continue to be a big, big growing market. Exchanges like ours here in Africa are working very hard to support these sorts of instruments and because then it’s a new growth area for the economy, for the market and the larger Africa as a continent.
In Kenya, we have seen that the younger generation in very interested in being financially independent. What are doing to woo students in the university, those newly employed and the Gen Z? Have you reached out to them intentionally to educate them about the stock exchange?
Absolutely, two months ago NSE launched NSEsoko, a virtual trading app by NSE to enable young people to learn about the market, do games that are related to the market, so that they use that to understand how the stock market works. This gamification becomes the basis for them to be able to transition from that simulated development, to trading in the market properly, having understood how the market works, what the various products are and the best practices.
The other thing is that NSE has been running a lot of financial literacy programs through social media, virtual training and classroom environments, to educate the market on various opportunities that are there, how the exchange works, what are equities, what are fixed income instruments, what are derivatives, what are real estate investment trusts, what are green bonds, what are shariah bonds, and all these instruments. So that people understand them, and it’s easier for them to now make decisions on what to invest in.
The last thing we’re doing with young people, is NSE is in the process of setting up an innovation lab so that we co-opt young people to come and co-develop products with us that we can the put out in the market. We are absolutely focusing on young people. In fact our new strategy speaks to that specific segment.
In this conference, we have seen a lot of regional collaboration. What is the benefit of regional collaboration with other countries and other stock exchanges?
There are different reasons why collaboration is the way to go and the benefit for it. Let me mention three.
The first one is the ability to share and exchange knowledge. This is important because in most Countries in Africa, we’re still developing our capital markets, our stock and security exchanges. There are things that have worked well in other markets within Africa, so we borrow and exchange knowledge to develop our own markets.
Number two is that the challenges we are facing are so big that no single exchange can solve it along. We need to collaborate and partner so that we share efforts to solve these issues. A good example is matters to do with financial literacy which is a complex and huge challenge. By joining forces and resources, we can tackle it together.
The last one is connectivity. We want to have our security exchanges connected across Africa. There’s a program called the Africa Exchange Linkage Program (AELP) that is meant to link various exchanges in Africa. That way Africans can trade across borders, so that if l am in Kenya, l can buy shares in Egypt, South Africa, Nigeria, Morocco or Ghana without leaving the country. It should be seamless. The days are gone when we should see the continent as different countries. It’s time from a capital markets perspective, that we start seeing the continent as one big marketplace that’s interconnected. Who is best placed to invest in Africa than us.
A lot of digital marketers have come up promising to assist people in purchasing of international stocks like google or Microsoft. Some say they are good other say they are not. Is there a way to regulate them so that people stop losing their money through digital marketers ?
That is a very critical point that you have raised. There is a lot of unregulated, unlicensed and potentially untrustworthy players particularly online. They are offering all manner of proposals and requests. The way to deal with this is to make sure that you work with licensed and regulated local players. In Kenya, as an example, the primary regulator and the issuer of licenses is the Capital Markets Authority (CMA), and the equivalent is available in other Countries.
The NSE is a first line regulator in terms of trading in the Kenyan market
The point is that if you’re not dealing with licensed and regulated parties, it is likely you might be dealing with a player that’s not credible, where you will have no recourse if things go wrong. You might be dealing with scammers and fraudsters. It’s important for people to attend the financial literacy classes because they are online and available, a lot of them are free. They help one understand how to trade and how to do it with integrity and in a safe way
The NSE is working on coming up with more innovative products that will enable more people to trade the world through the NSE.
That way, you do not have to worry about the credibility of what you are buying. It is credible in the sense that it is offered through the NSE in a regulated environment that is licensed and monitored for integrity.
The last thing to mention is that as new products come to market, it’s good for people to take time to understand them, so that they understand the risks they are taking before they invest their hard-earned savings into what may turn out to be a scam. Work with licensed and regulated entities, that gives you higher assurance.
