Kenya has been ranked at the 7th position in the latest edition of the Africa Financial Markets Index that benchmarks countries’ performance across a host of indicators within financial market development.
However, Kenya’s score is a decline compared to its third position in 2019 and 2018.
The decline was attributed to Kenya’s inability to make significant gains in the legality and enforceability of standard financial markets master agreements amongst its peers.
Other factors include the dependence of foreign investor participation on its equities market, reduced market capitalization at the bourse which was triggered by the COVID-19 pandemic which saw foreign investor sell-offs through the second quarter of the year.
The Absa Africa Financial Markets Index evaluates financial market development in 23 countries and highlights economies with the most supportive environment for effective markets.
“The aim is to show present positions, as well as how economies can improve market frameworks to bolster investor access and sustainable growth.”
The index grades countries on six principles of financial markets specifically; market depth, access to foreign exchange, market transparency, the capacity of local investors, macroeconomic opportunity, and the legality and enforceability of standard financial markets master agreements.
- Average overall score dips to 51 out of 100 from 53 in 2019, partly due to slower market activity in the first half of 2020 and stricter scoring in some indicators.
- Countries perform best in ‘market transparency, tax and regulatory environment’, scoring 67 on average.
- South Africa and Mauritius maintain their lead in the index, scoring 89 and 79, respectively.
- Namibia tops ‘capacity of local investors, while Mauritius retains its lead in ‘legality and enforceability of standard financial markets master agreements’.
- Green finance is gaining momentum, with Nigeria, Kenya and Egypt among countries that have issued sovereign green bonds in the past year.
South Africa and Mauritius retained the top spots in the index, scoring 89 and 79, respectively.
Nigeria, Botswana and Namibia round off the top five. All three score above 50 in nearly all pillars. Namibia loses points from its failure to align with international contractual standards, while Nigeria’s lack of a unified exchange rate system pulls down its score.