Small and medium-sized enterprises (SMEs) are expected to start raising capital through the Nairobi Securities Exchange (NSE) during the second half of this year.

This comes after the Capital Markets Authority (CMA) approved the rules and regulations governing the operations of the Growth Enterprise Market Segment (GEMS), a middle capital (Mid Cap) market segment.

The electronic board at the Nairobi Securities Exchange. NSE Chairman Eddy Njoroge says SMEs are expected to list at the bourse in the second half of this year

Mr Eddy Njoroge, the bourse chairman, said the proposed regulations would be forwarded to the minister for Finance for gazettement.

” The market is expected to be operational in the second half of this year,” he said.

Njoroge said the establishment of the Mid Cap market segment is not only expected to diversify the avenues of long-term capital for SMEs, but also raise the level of savings and investments within the capital markets through additional listings.

He said the introduction of the Mid Cap Market is in line with the Government’s focus on the SME sector as one of the key drivers of Vision 2030, destined to play a role as an engine for economic growth, poverty eradication, and employment creation.

“We aresetting up the Growth Enterprise Market Segment (GEMS). This market segment will facilitate the listing of SMEs,” Njoroge said while reviewing the bourse’s performance last year.

The exchange made up of the Alternative Investment Market Segment (Aims) and the Main Investment Market Segment (Mims), whose stringent listing requirements have locked out small businesses from tapping into the capital markets.

It is argued that the SMEs have been unable to meet the minimum listing requirements such as having an asset base of between Sh20 million and Sh100 million, having a shareholder roll of between 100 and 1,000 and the cost of making disclosures as a public firm.

In addition, SMEs are currently deprived of affordable credit from commercial banks, which still view them as risky borrowers and often place tight lending requirements before advancing credit.

Difficulties in accessing financing have held back small enterprises from achieving their full potential despite entrepreneurs in the sector emerging as an engine for growth and employment creation in corporate Kenya.

Creating a counter for SMEs is expected to enable them to tap into a new pool of funds, which has seen largely meant for corporate bodies and the government, which borrow massive funds at cheap rates through the platform.

Kenya has about 1.6 million registered SMEs constituting about 96 per cent of all business enterprises in the country.

These small businesses employ about 5.1 million people accounting for 75 per cent of the total labour force and contribute 20 per cent to Kenya’s gross domestic product.

NSE reckons that a special market division for the SMEs will help them gain access to manageable and affordable capital for growth and expansion and provide an exit strategy for family-owned business enterprises through separation of ownership and management.

By James Anyanzwa, The Standard

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