EA seeks broader public participation in capital markets

DAR ES SALAAM: EAST African capital markets need to move beyond simply making investment products accessible and focus on turning growing financial inclusion into meaningful participation and long-term wealth creation, financial-sector experts have said.

The region has made notable progress in expanding investment products and using technology to bring financial services closer to ordinary people. However, access alone does not guarantee that people are actively participating in capital markets.

The next stage should focus on whether potential investors understand available products, trust formal investment channels and can identify investments that match their financial goals, risk appetite, liquidity needs and investment horizons, the experts said.

They also called for more inclusive distribution channels, stronger investor education and deeper regional market integration to ensure women, young people, rural communities and people without smartphones are not left behind as capital markets become increasingly digital.

The observations were made during a panel discussion on “Democratising Capital Markets in East Africa,” which brought together financial-market practitioners and investment experts from Tanzania, Kenya and Uganda.

Financial Sector Deepening Tanzania (FSDT) Research, Results and Insights Consultant Ms Julia Seifart said the focus should shift from whether investment opportunities were available to whether people could understand, trust and use them to build wealth.

She said access to financial services should not be regarded as the end of the financial-inclusion journey, with greater attention needed on financial health.

“Capital markets that are simply available” need to become markets that people can “understand, trust, use, as well as build wealth through,” she said.

Financial health, she explained, involves people’s ability to meet day-to-day financial needs, achieve financial goals, withstand unexpected shocks and interact confidently with financial-service providers.

Tanzania’s financial-inclusion rate is about 76 per cent, but much of the progress has been driven by mobile money, with many users mainly relying on the services to send and receive money.

Ms Seifart said the country still faced challenges in savings, insurance coverage and financial literacy, limiting the ability of people to use financial services for long-term wealth creation.

“About four in 10 Tanzanians are currently saving, but much of the saving is intended to address immediate needs rather than support long-term wealth creation. Insurance penetration remains low, although ongoing efforts to expand health insurance coverage could help improve people’s ability to withstand financial shocks,” she said.

She identified women, young people and rural communities among groups that continue to face challenges in accessing and participating in capital markets.

The expansion of digital investment platforms has created new opportunities, she said, although limited smartphone penetration remains a barrier.

Ms Julieth Ngina of Equity Investment Bank in Kenya said product innovation should be accompanied by stronger investor education and awareness.

Financial institutions, she said, need to make investment information easier to understand and incorporate educational content into digital platforms so investors can make informed decisions.

“When you develop more products, then you need to create more awareness about these products,” she said.

She added that widening the channels through which people can participate would help address some of the barriers identified.

Certified Financial Educator (CFE) Ms Wanda Gordon said financial literacy was another major factor limiting effective participation in investment markets.

She said investors often focused on the percentage return offered by an investment without sufficiently considering liquidity, risk and the purpose of the investment.

Investors should first determine what they want their money to achieve, when they will need it and how easily they may need to access it, she said.

Ms Gordon cautioned against pursuing quick returns, saying impatience could expose investors to risky and unregulated opportunities.

She also stressed the importance of diversification, noting that no single investment can simultaneously provide the highest possible return, complete safety and immediate liquidity.

Meanwhile, SGB SecuritiesUganda representative Mr Kimuli Musaazi said deeper regional integration could create more opportunities for East African investors by allowing them to invest across markets more seamlessly.

ALSO READ: Youths find fortune in capital markets

He said technological developments had changed how markets operate, with electronic trading replacing traditional systems and creating opportunities for greater connectivity.

He said ongoing efforts to integrate East African trading platforms could eventually make it easier for investors to participate in markets across the EAC bloc.

Investors also need to trust regulators and intermediaries when entering unfamiliar markets, he said, adding that cooperation among licensed financial institutions could help strengthen confidence.

Mr Musaazi encouraged people to start investing early rather than waiting until markets had already gained momentum.

“Start early,” he said, arguing that many people miss investment opportunities because they wait until markets are already moving.

Capital A Investment BankKenya representative Mr Churchill Ogutu said East Africa’s economic environment also offered opportunities for greater capital mobilisation within the region.

The region’s relatively high economic growth, diversified economies and ongoing infrastructure development create opportunities for investors across different sectors, he said.

Mr Ogutu also highlighted the importance of domestic capital in financing development, saying East African countries should not rely excessively on foreign investors when local savings could be channelled into productive investments.

He cited Kenya’s National Social Security Fund (NSSF), which has expanded its investment activities beyond traditional assets such as government securities and equities into infrastructure projects.

Such investments demonstrate how domestic savings can be mobilised to finance major development projects while creating opportunities for citizens to benefit from economic growth.

For Tanzania and the wider region, the challenge is increasingly to ensure that growing access to financial services translates into active investment participation and greater opportunities for households to build and preserve wealth.

Ultimately, democratising capital markets will require more than lowering access barriers.

It will depend on financial education, understandable products, wider distribution channels, stronger trust in formal markets and deeper integration of East African financial systems.