Capital markets face investor apathy—RBM

The Reserve Bank of Malawi (RBM) and Ministry of Finance have urged Malawians to embrace a culture of investing in capital markets to contribute to economic development.

The call comes as the country’s capital market is still in its infancy with 16 companies listed on the Malawi Stock Exchange (MSE) despite being operational for more than 20 years.

Analysts have argued that the vibrancy of the capital markets comes in when demand and supply of capital is high, which means that investors’ returns are attractive and the investees’ objectives of accessing cheaper capital are met.

On the other hand, the analysts further argue that equity market is perceived not ideal for indigenous citizens in view of the low dividend payouts, meagre capital gains and weak laws to protect minority shareholders.

But speaking in Lilongwe on Monday during the launch of a week-long Investor Education and Awareness Week, RBM deputy governor responsible for economics and regulation Grant Kabango admitted that capital markets have generally been considered a space for the elite and high net-worth individuals.

He said: “Increased participation by retail investors, including small and medium enterprises in capital markets is more important now than ever as we move to a new long-term development agenda.

“Mobilisation of savings has been generally low with gross domestic savings as a percentage of gross domestic product estimated at 6.9 percent in 2019. This compares unfavourably with the sub-Saharan Africa region, which recorded 19.5 percent during the same period.”

On his part, Ministry of Finance director of pensions and financial sector policy Alfred Kutengule said Treasury’s ability to raise adequate funds for the national budget largely depends on the size and capacity of the investment by the public.

“Participation of retail investors in government securities is undesirably low. Retail investors are mostly constrained by low financial literacy levels, low income levels and the often lack of innovative, trustworthy, user-friendly and cost-effective ways of accessing the capital market,” he said.

In his remarks, MSE chief executive officer John Kamanga observed that Malawians are slowly becoming aware of investing on the stock market, but admitted that a lot needs to be done to increase participation.

He said with the increasing uptake of digital services in the country, MSE wants to leverage on the opportunity to ensure that investment messages reach everyone with a mobile phone.

The week is being held under the theme: Investor Education, a Catalyst to Wealth Creation.