USE concedes failure of SME capital mobilising segment, creates new window

Through USE Edaala, USE is seeking to provide a window through which small and medium enterprises can mobilise capital for long term investment. Photo / File 

What you need to know:

  • The USE currently has 18 companies listed on Maini Investment Segment, with only two corporate bonds and more than 34 treasury bonds.

Uganda Securities Exchange (USE) has conceded that the Growth Enterprise Market Segment (GEM) has failed to takeoff. 

The segment, which was established in 2012, had sought to create a window for small and medium sized companies, through which they would raise capital to accelerate growth of their business offered against flexible listing requirements. 

USE did not indicate reasons for the failure but noted that the segment had attracted low public participation thus forcing it to rethink on a new way through which small and medium sized companies can be revitalized to participate in equity markets before upgrading to publicly listed companies in the stock exchange.   

The USE currently has 18 companies listed on Maini Investment Segment, with only two corporate bonds and more than 34 treasury bonds.   

Yesterday, USE said it had created a Specialised Market known as USE Edaala, an unquoted securities platform that will support companies, which do not meet listing requirements on the main exchange to access long term capital.  

The funds, USE noted, will be available to private companies through private placements and restricted offers provided by professional capital investors for both equity and debt funding. 

The USE Edaala will also facilitate private companies with numerous shareholders benefits from the deficiencies provided by existing trading and depository platforms with shareholders being able to trade their shares should they wish to divest their stock and utilse portfolio management tools.  

Speaking about the new segment in Kampala yesterday, Mr Paul Bwiso, the USE chief executive officer, said the name “USE Edaala” had been derived from a Luganda word Edaala, which means a ladder, because of underlying symbolic meaning of growth, raising to next level, bridging gaps and scaling heights. 

“We think this is exactly what USE Edaala will do for small and medium businesses,” he said, noting that any private or public company that is operating and has been incorporated in Uganda, will be eligible apply to participate in the market provided it has minimum net capital of Shs500m. 

The application period for the first cohort commenced on Tuesday and is expected to close on December 8, after which the USE will conduct an assessment of the applicants for eligibility. 

Through the new segment, companies will be able to access long term capital through private placements, access to a wider pool of domestic and international investors, flexible admission and regulatory compliance requirements, among others. 

Mr Bwiso said a number of professional investors had already expressed interest to invest money in high growth companies and high risk investments.  

Ms Allison Seruccaca Kwikiriza, the USE legal and compliance manager, said the new market development strategy seeks to create a sustainable financing model to support business growth and expansion. 

Benefits

Application for the first cohort commenced on Tuesday and will  end on December 8. The new segment will allow companies to access long term capital through private placements, a wider pool of domestic and international investors, flexible admission and regulatory compliance requirements. 

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