Does the Capital Market Matter?

Written by John Doe

May 15, 2024

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Does the Capital Market Matter?

The capital markets in Africa have a long and complex history. The earliest capital markets on the continent can be traced back to ancient Egypt, where a system of credit and exchange using grain as a medium of exchange developed. In the 19th and early 20th centuries, European colonial powers introduced modern capital markets to various parts of Africa, often using them to finance infrastructure projects and extract natural resources.

In the post-colonial era, many African countries struggled to develop functioning capital markets due to political instability, economic mismanagement, and other challenges. However, over the past few decades, there have been significant efforts to modernize and develop capital markets across the continent. Today, there are active capital markets in a number of African countries, including South Africa, Egypt, and Morocco. 

In April 2021, the Ethiopian government issued a proclamation and directives to establish a capital market in the country. This marked a significant step in the development of Ethiopia's financial sector and was seen as a key component of the government's efforts to diversify and modernize the economy.

The proclamation outlines the legal framework for the establishment and operation of a capital market in Ethiopia, including provisions for the establishment of a regulatory authority, the Ethiopia Capital Market Authority (ECMA), and the creation of a stock exchange. It also sets out the rules and regulations for the listing and trading of securities, as well as the rights and responsibilities of market participants.

4 reason why Capital Market matters in Ethiopia 

  1. Access to capital: Capital markets provide a way for businesses and individuals to raise capital by issuing securities, such as stocks or bonds. This can be especially important for small and medium-sized enterprises (SMEs) in Ethiopia, which often have limited access to traditional sources of financing such as bank loans.

  2. Economic growth and development: A well-functioning capital market can help stimulate economic growth and development by channelling savings and investments into productive activities. It can also provide a source of finance for infrastructure projects and other investments that can promote long-term economic growth.

  3. Diversification of investment opportunities: Capital markets provide a wide range of investment opportunities for individuals and institutions, allowing them to diversify their portfolios and manage risk. For example, an investor can buy stocks in a variety of companies in different industries, rather than just investing in one company or sector.

  4. Price discovery: Capital markets play an important role in determining the price of securities, such as stocks and bonds. By bringing buyers and sellers together in a centralized marketplace, capital markets provide a transparent and efficient way to determine the value of securities. This can help ensure that prices reflect the underlying value of the securities and can help allocate capital to its most productive uses.:

i-Capital has entered into a partnership with the Nairobi Securities Exchange (NSE) to deliver skill and competencies training in the field of securities exchange. This collaboration is a testament to our commitment to supporting the growth and development of professionals in the financial sector.

Through this partnership, we will be offering a range of training programs and workshops designed to help individuals and organizations build expertise in the securities exchange industry. We look forward to working with the NSE and helping professionals in the region enhance their skills and competencies in the exciting and rapidly-evolving world of securities exchange.