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Incentives could attract firms to capital market

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By Taonga Sabola:

A financial markets expert has said dangling incentives could attract firms into listing their equity on the capital market.

The expert, Gabi Afram— who is Lead Financial Sector Economist; Finance Competitiveness and Innovation Global Practice at the World Bank—was speaking in Mangochi District on Saturday when he delivered a keynote address during the 2018 Financial Market Dealers Association (Fimda) Annual Conference held under the theme ‘Sustaining a Sound Financial Market: The Case for Malawi’.

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Afram’s comment comes at a time the local capital market has remained relatively small with only 13 counters despite operating for 22 years.

In his paper titled ‘Catalysing Long Term Finance for Africa’s Development Needs’, Afram said needing finance does not mean that a company is willing to go to the markets to get it.

He said, with the supersonic speed at which pension funds are growing in Africa, including Malawi, there is need for more avenues through which fund managers could invest their funds, saying listed companies provide a better platform for that.

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Afram said markets could exist for many years without registering significant growth if no strategies are put in place to develop them.

Reserve Bank of Malawi Governor, Dalitso Kabambe, recently warned that the rapid growth in pension funds could result in an asset bubble.

“This, if not addressed by listing more companies on the Malawi Stock Exchange, will likely cause sub-optimal asset allocation, liquidity issues and an asset bubble. We have to avoid this at all cost, and the development of a stock market is a sure way of meeting the objective,” he said.

As at June 2018, pension assets rose 19 percent to K633.3 billion as a result of growth in contributions and investment income.

The substantial increase was also a result of the inclusion of assets of the newly registered Public Service Pension Fund which had assets of about K17 billion at the end of June 2018.

The Fimda conference attracted over 50 dealers from the capital, money, forex and commodity markets.

Outgoing Fimda president, Grey Kazima, described the conference as crucial for the growth and development of dealers in Malawi.

Kazima said the conference provides a platform through which dealers brainstorm on how to overcome some of the challenges faced.

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