Kenya stock exchange to start SME segment by 2012

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September 17, 2011
Kenya stock exchangeBy Duncan Miriri
Nairobi, Aug 24 (Reuters) – Kenya plans to start a segment for small and mid-sized firms at Kenyastock exchange next year to allow them to tap a new source of capital and to offer investors new assets to invest in, the chief executive of the market regulator said on Wednesday.

The small and medium enterprises (SME) sector is estimated to account for 80 percent of jobs in the private sector and to contribute about 40 percent to the east African economy.

By the end of the year we should be able to have an SME segment… it is important to have at least a few (listings) and these will then go out and talk about their experience and obviously if they have had a positive experience, we will see more coming on,

- Stella Kilonzo told reporters.

The SME segment in Kenya range from family-owned bakeries and fast food chains to manufacturers and developers.

Regulators hope that the new segment will benefit firms and investors alike especially as the sector offers faster rates of growth than that of mature companies.

This market will provide diversification for savers, offering the ability to invest in a high growth company,

– Kilonzo

“On the other hand there is the issue of small medium enterprise being able to access financing through the listing as well as price discovery.”

Fund managers welcomed the move but said there were risks.

If it is done properly and obviously they are putting in a lot of work to get it right, it is fantastic,

Paul Sigsworth,
head of the country’s fund managers’ association.

“The risk would be if the new entrants were overpriced and then the investors lost faith in the whole product. Once they have listed we have to ensure that governance issues are carefully dealt with.”

Companies that take the listing route in the SME segment must take on strong, meaningful external representation on their boards, Sigsworth added.

Under a proposed model, firms wishing to list will have to nominate advisers who will serve as a link with the market, offering advice and ensuring transperancy rules like quarterly reporting are followed.

Of course there are risks. Those nominated advisers will be very key for us. These companies will still need to have some track record, it is just that the requirements are lower than in the main market,

- Kilonzo
Editing by Yara Bayoumy and Mike Nesbit.

Source : Reuters Africa

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