Establishing an SME’s Securities Exchange in Kenya

sme stock exchangeTo spur growth in our Kenyan economy, we need to economically empower the small and medium sized companies. Unfortunately, SMEs have no access to the capital markets due to the stiff regulations that they have to abide with before listing there.

It therefore elicits a somehow illogic question: why not have a securities exchange that is purely meant for SMEs with customized rules and regulations that favor them?

The benefits of a securities exchange can never be over-emphasized. A senior investment analyst in Kenya once said that to give the economy the vibrancy it requires, money has to be shifted from the banking sector to the capital markets. The exchange creates an avenue through which companies can raise money needed for growth and expansion as and when they want to.

A shilling invested at the securities market is a shilling going to fund the operations of a given company listed at the exchange. This creates a better avenue to utilize investors’ savings in facilitating production in the economy and thereby boosting the country’s overall economic growth and development.

Through thorough screening before listing and the subsequent financial reporting and ethical requirements for listed companies, transparency and performance is enhanced on these firms. The securities market also has a way of allocating funds to better performing companies, thus ensuring capital invested in the country is being utilized optimally for maximum benefits to the investors and the economy at large.

It is on this background that a proposition is being put forward for the establishment of an SME’s securities exchange in Kenya to be run independently from the NSE. Sounds crazy, but if the capital gap being experienced by SME’s in Kenya today is anything to go by, then we need to be looking for alternative ways of raising capital for the budding enterprises mushrooming daily.

The securities exchange for SMEs comes in to fill that gap. Like it is explained above, this will foster corporate governance and improve performance from the listed SMEs due to the thorough screening before listing. The existing financial reporting rules governing public companies and the ethical requirements will also go a long way in streamlining operations in our SMEs as we give them a chance to compete both regionally and globally.

In a bid to grow and expand our economy through increasing production, we should seriously consider how to financially empower our largest agents of production in Kenya: the SMEs. A securities exchange for them could just be the first big stride in that direction.

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