DOORS OF OPPORTUNITY OPEN FOR SME'S ON THE STOCK MARKET.
‘The SME market is intended to offer issuers benefits by permitting for listing by introduction, without a public capital-raising component. It is aimed at seeing enterprises broaden their shareholder base and gain access to open market valuation through market price discovery,” said the Capital Markets Authority (CMA) chief executive, Stella Kilonzo. This follows approval of rules governing the listing of SMEs by the capital markets regulator. Small and medium enterprises (SME) with a capital base of at least Sh10 million can list at the Nairobi Securities Exchange (NSE) without necessarily selling shares to the public from June 2012.
The budding enterprises will be listed under a new segment called Growth and Enterprise Market Segment (GEMS). The listing is expected to make it easier and cheaper for medium-sized enterprises to raise funds through rights issues or corporate bonds, while easing the process of trading shares for the shareholders.

Listing at a regulated exchange builds the confidence of potential investors in a company. Ms Kilonzo said the regulator developed the policy and regulatory framework jointly with the NSE and the Central Depository and Settlement Corporation (CDSC), the custodian of electronic investor share accounts. CMA said the introduction of the small companies at the NSE is part of the government policy to promote micro, small and medium enterprises as one of the key drivers of Vision 2030.

She also cited a report titled Impact Investing Challenges and Opportunities in the East Africa’s ICT sector written by the Authority in conjunction with the Rockefeller Foundation as having identified viable SMEs with investment opportunities.



Mrs. Stella Kilonzo.

 “In the long term, the SME market will gain from access to long-term capital by introducing modalities for the public offer of securities by SMEs thus enabling SMEs to raise capital through share offers,” said Ms Kilonzo.

She said the approved policy and regulatory framework necessitates companies aspiring to list in the GEMS at the NSE to have minimum capitalisation of Sh10 million, with no trading record or profit history required.

The SMEs will also be required to appoint a duly vetted and approved nominated advisor who will be responsible for overseeing the company’s compliance with the listing and regulations.

The advisor is also expected to ensure that at least one third of the company’s directors undergo a corporate governance director’s induction programme.

The creation of nominated advisors is aimed at reducing the costs associated with building up internal capacity for listing prior to a company coming into the market, thereby reducing the operation costs and encouraging wider participation by SMEs.