Kenya's financial markets ranking rises to 8th in Africa

Kenya has climbed two spots in its financial markets ranking on the continent in the just published 2022 Absa Financial Markets Index.

The higher ranking has been achieved on the backdrop of progress made in sustainable finance with the country incorporating climate risks into financial stability regulation.

During the past year, for instance, the Central Bank of Kenya (CBK) issued guidance for banks to incorporate climate-related factors into their risk management framework.

The incorporation has seen Kenya earn 88 points out of 100 in market transparency, tax and regulatory environment.

Kenya was among four countries to make the connection between climate risk and financial stability alongside South Africa, Egypt and Mauritius.

The country has nevertheless scored poorly in the capacity for local investors with 20 out of 100 points given the limited scope of investments made by pension assets.

“Most countries have limited pension assets. They are often constrained to investing in government securities, reducing the possible gains from diversification,” noted the index report.

Kenya also scores low in market depth at 43 points while all other scores are above the 50 points mark including access to foreign exchange (82 points), macroeconomic environment & transparency (74 points) and legal standards and enforceability (55 points).

The country’s planned introduction of a higher rate of capital gains tax (CGT) at 15 per cent in January 2023 is nevertheless seen as a dampener to its investment climate.

The index ranks 26 countries primarily on measures of market accessibility, openness and transparency.

South Africa, Mauritius and Nigeria have maintained the first three spots on the index this year with overall scores of 88, 76 and 69 against Kenya’s 61 points.

Other countries making the top 10 in the index by order are Uganda, Botswana, Namibia, Ghana, Morocco and Egypt.