Business owners can fund their business through various means but they fall mainly into two main brackets i.e. equities or debt.
There is occasional structuring that is done to get some in between the two forms of capital sources to enhance the attractiveness to potential investors.
Globally, capital markets play a key role in ensuring that businesses get the requisite funding and that owners of Capital are well protected and get the return that is required.
Most of the investments in the Capital Markets are long-term in nature and it is therefore important that all the players actually understand the products that are offered in the markets before either issuing them to raise funds and also before buying into them.
For instance, with the pandemic, there was a lot of volatility in most markets with the Kenyan equities market for example declining by 8.6% last year.
Despite the volatility, it is important to note that capital markets continue to play a key role in economic development more so as a source of funding for businesses and individuals.
Capital markets’ main role is to link suppliers of capital for example pension schemes or SACCOs with users of the capital i.e. people who are mainly in the production of goods and services across sectors. The capital markets, therefore, play a vital role in economic development as they promote growth in the real economy by enabling access to long-term financing for producers of goods and services, and entities tasked with infrastructure development like the government. To be able to efficiently do this, the capital market players should ensure that they are promoting a saving and Investments Culture, linking suppliers and users of capital as well as facilitating the efficient and effective allocation of resources in the capital markets.
Over time, the Kenyan capital markets have evolved, achieving a number of milestones over the years and in effect, catalyzing economic growth. One such milestone is the establishment of the Growth Enterprise Market Segment, (GEMS), which was set up in 2013 with the intention of enabling venture companies without a profit history as well as Small and Medium-sized firms to list in the NSE. So far, the segment has four listed companies and still attracts more, as recently, Homeboyz Entertainment was listed by way of introduction on the GEMS. Additionally, the Nairobi Securities Exchange (NSE) launched Kenya’s first formal Over-the-Counter (OTC) market platform, the Unquoted Securities Platform, to facilitate the trading, […]
