The Malawi Stock Exchange (MSE) has acknowledged that the corporate sector’s reluctance to enter the bonds market is hindering its potential role in economic transformation.
This is happening at a time the Treasury continues to dominate the platform.
For example, a Reserve Bank of Malawi (RBM) third-quarter financial and economic review shows that the Treasury currently holds K3.2 trillion worth of debt instruments in the bond market, comprising 71 Treasury notes.
“During the period under review, the market registered three maturities of Treasury securities. As such, the number of debt instruments on the market, as of September 30 2024, stood at 71, all being Treasury notes and with a nominal value of K3.2 trillion,” the report reads.
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The private sector’s low participation in the capital market, traditionally a source of affordable long-term investment credit, is reportedly impeding industrial transformation.
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MyBucks Banking Corporation’s K10 billion bond, issued for the bank’s establishment and since matured, remains the only corporate bond ever issued.
In an interview, MSE Chief Operating Officer Kelline Kondowe attributed this to low awareness and lack of capacity to comply with the conditions of issuing a bond among private sector players.
“With bonds, one needs to demonstrate that they can repay the money and there is a requirement for a guarantee. So, we see that companies struggle with that. The high interest environment has also meant issuers need to offer better interest rates than what is obtaining on risk-free government bonds.
“Currently the utilisation of the stock market could be better and we believe, with the right policies and incentives, we can have a vibrant stock market that supports our private sector and contributes to ending the structural imbalances that exist,” Kondowe said.
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She, however, was optimistic that future listings would incorporate private sector players.
The MSE has recently launched guidelines for sustainable bonds issuance, adapting to growing emphasis on green financial products.
Additionally, Blantyre Hotels Limited’s current rights offer, seeking K62.4 billion, demonstrates the capital market’s potential.
