What you need to know:
Capital markets funding creates competition and efficiency in financial markets.
Kampala- The East African Development Bank has advised company owners in East Africa to rethink ways of mobilising capital for their expansion through the capital markets instead of sticking to the conventional ways of borrowing cash banks.
The advice comes at a time when both the government and the private sector continue to deal with the problem of high interest rates on commercial loans as they borrow for financing various investment projects.
Speaking at the listing of National Insurance Corporation Rights Issue shares on Uganda Securities Exchange in Kampala last Friday, the Director General of East African Development Bank, Ms Vivienne Yeda, said mobilising capital through the capital markets is cheaper and creates competition and efficiency in financial markets.
“We all have to rethink of our resource mobilisation. We would like to see a lot of activities in the capital markets; more Rights Issues, more debts (corporate bonds) and more Initial Public Offer (IPOs) being done by companies,” she said.
The bank has been at the forefront in developing the capital markets industry in East Africa by listing corporate bonds in the member country stock exchange in the past years. “We (East African Development Bank) will be working with the market to raise funds through the capital markets,” she promised.
The buyers or investors of securities in the capital market tend to use funds that are targeted for longer-term investment.
Sellers make money off the sale in the primary market, not in the secondary market, although they do have a stake in the outcome (pricing) of their securities in the secondary market.
The chief executive officer of Crested Stocks & Securities, Mr Robert H Baldwin, said there is a lot that needs to be done about educating shareholders of various companies listed in the stock exchange.
“Shareholders must be active in investing their shares whenever there is corporation actions in the company they have shares in,” he said.
Capital Markets Authority chief executive officer Keith Kalyegira said that the capital that NIC has raised should help it strengthen its balance sheet going forward as it seeks to position its self in new areas of insurance service provision in Uganda.