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Kenya drops four places in Absa ranking

By , People Daily Digital
Thursday, October 14th, 2021 00:00 | 2 mins read
Nairobi Securities Exchange. Photo/PD/FILE

Kenya dropped four places in Absa Financial Markets Index 2021, which measures the conduciveness of capital markets for investment and growth.

The index that highlights economies with the most supportive environments for effective markets shows Kenya’s ranking fell from position seven last year to 11 in 2021 in Africa as Uganda, Ghana and Tanzania accumulated gains.

“This decline reflects more difficult market conditions, methodological changes and the inclusion of environmental, social and governance indicators in the index,” the Absa survey says.

The index assesses countries according to six pillars: Market depth; access to foreign exchange; market transparency, tax and regulatory environment; capacity of local investors; macroeconomic opportunity; and enforceability of financial contracts. 

Sustainable bonds

Kenya’s score was, however, supported by the introduction of greenbonds on Nairobi Securities Exchange (NSE) boosting its sustainability index.

“Kenya and Morocco score highest in this indicator for having green or sustainable bonds, equities and mutual funds in their markets.

Additionally, Kenya has issued ethical securities to fund socially responsible investment opportunities,” the Index shows.

East Africa’s largest economy performed poorly in capacity of local investors as most of the trades are driven by foreign investors.

Kenya also did poorly in enforceability of financial markets operating standards.

Market depth and access to foreign exchange were also below average compared to other nations such as Nigeria, Mauritius and Morocco and South Africa. 

Kenya scored 46 per cent on market depth and 44 per cent on access to foreign exchange.

On transparency, Kenya was at 75 per cent while participation of local investors was 24 per cent. 

Debt distress

On macroeconomic stability, Kenya also scored 62 per cent but enforceability of standards was 28 per cent.

Kenya was identified by the IMF as part of the countries at high risk of debt distress which led to lower rankings for Kenya.

Others are Cameroon, Ethiopia, Ghana and Zambia, while Ivory Coast, Lesotho, Malawi, Rwanda, Senegal and Uganda are at moderate risk. 

Kenya, however, is one of the countries on the continent which still enjoys good access to international markets.

Several countries, including Ghana, Kenya, Senegal, Ivory Coast and Cameroon issued eurobonds in the first half of 2021.