13 March 2017
Nairobi
Reporter: Drew Nicol

Kenyan securities lending drive gains international support


Kenya’s capital markets liquidity drive received another boost last week as the country’s Capital Markets Authority (CMA) looked to diversify available financial products with the help of several international bodies.

Securities lending was once again highlighted as an area of Kenya’s capital markets that should be developed in order to improve overall market liquidity and continue the forward momentum enjoyed in recent years.

CMA chief executive Paul Muthaura said: “After a comprehensive review and analysis of the securities market, the CMA has identified several areas for improvement, including securities lending and borrowing, strengthening of collective investment schemes (CIS) reporting and structuring and, in line with the ambitions of the 10-year Capital Market Master Plan, positioning Kenyan securities and the overall market for inclusion in the right market indices.”

“This week’s [7 March] consultations are an important first step in building the capacity of the CMA and market participants to develop new products and services that will enhance liquidity.”

Despite recent market growth, the CMA has acknowledged several challenges remaining in the market’s landscape including the need for stronger market infrastructure and increased diversification of financial products.

According to the CMA, new and improved services are vital to cater to the growing needs of investors and issuers, and the need to improve the level of awareness among potential and existing investors regionally and internationally.

To further these aims, the CMA has partnered with the US Securities and Exchange Commission, the Financial Services Volunteer Corps (FSVC) and Bloomberg, along with other industry stakeholders.

FSVC is a not-for-profit organisation that deploys volunteer experts to emerging market countries to help strengthen financial sectors.

As part of the collaboration, representatives from these entities met with CMA officials and Kenyan market regulators to present international best practices in adopting and implementing securities lending and CIS transparency.

The move to introduce securities lending into the Kenyan market first began to gather pace in October 2016 when the CMA, in conjunction with the World Bank, open its finalised capital markets regulation to enable securities lending and short selling for feedback from market players.

The latest version of the regulation outlines internationally recognised standards for appropriate lending behaviour such as the need for collateral provided to value at least 100 percent of the securities lent.

Bloomberg LP chairman Peter Grauer added: “Stronger trade and investment ties between the US and African countries are mutually beneficial, and East Africa is a region of enormous strategic importance as well as economic potential.”

FSVC president and CEO Andy Spindler stated: “Drawing upon FSVC’s significant expertise in the area of capital markets development, these consultations will help enable the CMA to develop new products and undertake key reforms to improve liquidity.”

“Robust capital markets play a critical role in sustainable economic development by mobilising domestic savings and foreign capital for longer-term, productive investment.”

“Kenya has already made significant strides in this area, and, thanks to the support of Bloomberg, FSVC will help the CMA establish a vibrant and competitive financial sector driving economic growth in the region.”

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