Inequalities persist in capital markets—experts

Officials from the Malawi Stock Exchange (MSE) and financial advisers have decried inequalities in accessing financing from the capital markets despite huge finance available in capital markets.

Speaking during a business meeting in Lilongwe on Tuesday, MSE board chairperson James Kamwachale Khomba said there is more than K2.1 trillion worth of capital in the 16-counter MSE but most businesses do not access it because they have not formalised their businesses.

He said: “We have two platforms on how companies can raise the funds, the main board and also the alternative board.

“So, for small companies they can come over the alternative board and access financing through the enterprise development and growth exchange programme.”

MSE chief executive officer John Kamanga urged investors to explore the financing options available on the stock market to raise capital to grow their businesses and ultimately contribute to economic growth.

He said: “Businesses need to do away with the myth that the capital markets are expensive.

“The cost of capital in the capital markets has gone down to as low as 3.5 percent, but businesses do not approach us to access them. You will note that this is significantly below the rates offered by the commercial banks.”

In his presentation, Bridgepath Capital chief executive officer Emmanuel Chokani said the financing available at the MSE has grown exponentially since 2011, when revised Pensions Act came into effect.

He said the amount of pensions funds pumped into the market has grown by 183 percent from K9 billion in 2011 to K165 billion last year.

However, Chokani said a significant portion of that investment, between 40 and 50 percent, is channelled to listed companies with only four percent going to unlisted companies.

He said: “Despite this growth in the capital market, we still have only 16 companies listed on the MSE, but there are more than 2 000 unlisted companies.

“So, companies need to come in, formalise their businesses so they can access the funds that are available.”

The reference rate, the rate at which commercial banks extend loans, is hovering at 24 percent.

This means that the cost of capital on the MSE is about 85 percent lower than what is prevailing in commercial banks.

The number of listed companies at the MSE has remained 16 since 2020.

The last two companies to list on the stock market were Airtel Malawi plc and FDH Bank plc in 2020.