Kenya’s financial market attractiveness in Africa fell in rankings to 7th position in 2020 compared to 3rd position the prior year. This is according to data gleaned from the Absa Africa Financial Markets Index 2020.
The index assesses countries according to six pillars:
- Market depth
- Access to foreign exchange
- Market transparency, tax and regulatory environment
- Capacity of local investors
- Macroeconomic opportunity
- Enforceability of financial contracts, collateral positions and insolvency frameworks
Kenya is at 5th position on the Market Depth pillar, ranked 10 on the Access to Foreign Exchange pillar, placed 9th in Market Transparency, Tax and Regulatory Environment index and is 9th on the Capacity of Local Investors pillar.
Kenya’s financial market is also ranked 11th in Macroeconomic opportunity pillar and 6th position on Standard financial markets master agreements.
Now in its 4th edition, the index is produced by the Official Monetary and Financial Institutions Forum (OMFIF), is an independent forum for central banking, economic policy and public investment.
South Africa and Mauritius retain the top spots in the index, scoring 89 and 79, respectively. Although both perform well in most pillars, South Africa maintains a sizeable lead because of its much deeper capital and foreign exchange markets. Nigeria, Botswana and Namibia round off the top five.
All three score above 50 in nearly all pillars. Namibia loses points from its failure to align with international contractual standards, while Nigeria’s lack of a unified exchange rate system pulls down its score.
The Absa Africa, Financial Markets Index, evaluates financial market development in 23 Countries and highlights economies with the most supportive environment for effective markets. The aim is to show present positions, as well as how economies can improve market frameworks to bolster investor access and sustainable growth.
OMFIF conducted extensive quantitative research using data from central banks, securities exchanges and international financial institutions.
Also, OMFIF surveyed over 30 policy-makers and top executives from financial institutions operating across the 23 countries, including banks, securities exchanges, central banks, regulators, audit and accounting firms and international financial and development institutions.
Namibia leads in Pillar 4- Capacity of Local Investors. Its pension funds have shown rapid growth in recent years. Namibia now has the highest level of pension assets per capita in the index.
Eswatini, a new addition to the index, has the largest pension funds relative to the size of its local market, which shows the potential available for local investors to propel market development.
Ghana rises the most in Pillar 2- Access to foreign exchange- with its foreign exchange liquidity increasing, as measured by interbank foreign exchange turnover.
Kenya’s Financial Markets
The Nairobi Securities Exchange (NSE), Central Bank of Kenya and Capital Markets Authority (CMA) have undertaken a series of policy reforms that have seen the increased attraction of the financial markets.
For instance, the CMA introduced rules for share buybacks, potentially encouraging market activity. Nigeria, Kenya and Egypt are among countries that have issued sovereign green bonds in the past year.
In February, Kenya launched Treasury Mobile Direct, allowing more of the retail investment market, banked and unbanked, to access the government bond market.