MARKET DATA REVIEW: Of mobile phones, stock exchange and financial nclusion

Given our 20-years history since the establishment of the capital market framework, what have we learned that will inform our different approach and way forward in the current environment where the inevitable triumph of urbanized and industrialized society is before us, as is being envisaged by our various national policies, plans and strategies? Is it time that we have a Capital Markets Policy? our neighbors in the EAC -- Kenya, Uganda and Rwanda have developed Capital Markets Master Plans – should we fast track the process of achieving the same? Would it be helpful to pursue our growth and development through such policies and plans? May be yes – but also maybe we may experiment growth and development via becoming more competitive, pursuing more broad and attractive regulatory framework, as we, the people (those operating in the capital markets and those who are currently not in this space), become more engaging, more creative/innovative and more industrious and entrepreneurial as we approach the whole issue of capital markets as a facilitator of capital raising, proving alternative investment venues and tools of financing our development projects and enterprises expansions.

With reference to innovation and creativeness as it relates to the Finscope Survey revelation -- two issues quickly come to mind; one—the report indicates that the collaboration between banks and other financial institutions (such as MFIs, Insurance companies, etc) with mobile money providers has significantly improved the proximity and accessibility of banking and other financial products and services to users. This supports what I alluded into in my last week’s piece, I said, we are currently in the midst of a defining moment for innovation in the financial services. This defining moment is largely driven by interlink of mobile phones technological development and financial services. This aspect is reshaping some aspects of savings, storage of wealth, funds transfer and investments experiences for many mobile phone users.

Why mutual funds/units trusts? as it were, a few people may be lucky to have bought shares that provide them with consistent high returns over a period of time; for most of us, picking individual stocks is a losing and blaming game, it is not as easy as a walk in the park, that’s why across the globe mutual funds are established in numbers to offer the less sophisticated retail investors with a simple and logical alternative to direct investment, this alternative has the benefit of diversification, that helps to reduce the overall investment risk and the discouragement that goes with blind investments. In the US for example, there are about 9,500 mutual funds – this is more than double the number of publicly traded companies in their stock exchanges, and here close to us – in Kenya, there are more than 15 mutual funds for 62 publicly traded companies, while in our case we have only one unit trust for 26 traded public companies – kindly note the ratio and discover the mismatch and discontent. When I ask those who I think could play a role in this space as to why are they not in this business? Of course, there is a range of justification – right or wrong. However, despite their varied responses – the one response which is consistent throughout is that which relates to the structural and regulatory challenges related to our current pension sector framework, the current framework makes it harder for unlocking the scale of funds that will be available to motivate and engage the assets/investment/fund management industry.

The UN defines financial inclusion as universal access, at reasonable cost, to a wide range of financial services provided by a variety of sound and sustainable institutions. Now, the key to ensuring there is a wide range of financial services, especially those related to savings and investments is to ensure that all households and businesses, regardless of income level, have access to, and can effectively use, the appropriate financial services they need to improve their services with the eventuality of financial freedom and financial independence. In this regard, for us in the capital markets – we need to enhance and make better regulations for the FinTech industry to innovate tools that will enhance the outreach while reducing existing transaction costs; we need to enhance the digital infrastructure within our technical and regulatory provisions; we also need to continually discover better ways of promoting financial and digital literacy/education among underserved population as we address cultural norms related to savings, as we leverage on social networks. Of course, in the process there is a need to consider the whole issue of more supply of capital markets products, investor protection and risk management, and this is where we, as a society, have the duty to real give attention as to how best we can embrace the fund/asset/investment management industry -- It matters a lot.

MARKET DATA REVIEW: Of mobile phones, stock exchange and financial nclusion

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