Kenya scores highly in adoption and compliance with
international regulations and standards in the financial sector but
questions remain about the capacity for implementation by auditors and
regulators, a new report on African financial markets says.
The
survey found that there is a gap between adoption of global standards
such as the Basel III for banks and implementation, with Kenya only
ranked seventh in market transparency, tax and regulatory environment
among the 17 African economies.
The first African
financial markets index was done by Barclays and global think-tank
Official Monetary and Financial Institutions Forum (OMFIF).
“That statement comes from the survey of individuals and market participants in Kenya.
This
is on the back of some of the things that happened in your financial
markets that have caused the regulators such as CBK to tighten the
regulations and activities of auditors for example,” said George Asante,
Barclays Africa head of markets outside of South Africa.
Irregularities
Kenya has seen a number of institutions, including three banks,
fall into difficulties due to irregularities in their books despite
audits being carried out every year.
In 2015 and 2016,
three banks—Dubai Bank, Chase Bank and Imperial bank—collapsed due to
either fraud or accounting shortcomings, while a number of listed firms
such as Uchumi Supermarkets, Mumias Sugar and Kenya Airways have had
corporate governance issues.
Nakumatt, once the largest retail chain in East Africa, is also on the brink of collapse.
The
index assesses a total of six parameters — the others being market
depth, access to foreign exchange, capacity of local investors,
macroeconomic opportunity and enforceability of legal agreements.
Overall,
Kenya was ranked fifth in the index with a score of 59 per cent, behind
South Africa (92 per cent), Mauritius (66 per cent), Botswana (65 per
cent) and Namibia (62 per cent).
The country performed
best in the ability to enforce contracts in the legal sector, which
Barclays and OMFIF say is important in attracting international
investors into the country.
Kenya also did well in
local investor capacity, with the report noting the country’s domestic
institutional investors hold assets worth up to $12.6 billion (Ksh1.3
trillion).
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