EALA seeks to address obstacles to capital markets integration

East African Legislative Assembly (EALA) is pushing for expedition of the harmonisation of regulatory frameworks and operational procedures in the regional securities market. While sitting in Kigali, last week, the Assembly urged the bloc, through the Council of Ministers, to work on a road map to regionalise the capital markets under the financial sector development programme in line with the common market protocol. The legislators are also calling for improved financial literacy, especially through the sensitisation and capacity building programs. The recommendations are contained in EALA’s report on an on-spot assessment of the bloc’s capital markets regionalisation project, indicating challenges including low levels of public awareness on what capital markets offer. According to EALA’s standing committee on communications, trade and investment, due to differential settlement cycles, the region’s Central Depository Systems (CDS) are not integrated thus causing high transaction costs. “This makes investors unable to compare costs of doing business in the region,” Uganda’s Lydia Wanyoto— a member of the committee, said, adding that there is still lack of total liberalisation of EAC economies which hinders capital market integration. From August 28-31, the committee headed by Rwanda’s Dr. James Ndahiro, conducted the on-spot assessment in two groups – one visiting Tanzania and Kenya and the other visiting Uganda and Rwanda, to “assess the status of implementation of the bloc’s capital markets regionalisation project. Wanyoto said that the East African Securities Regulatory Authorities (EASRA) and the East African Securities Exchanges Association (EASEA) are not recognised in the EAC structure yet they play an important role in bloc’s capital market integration process. “Maintaining the status quo in East Africa is not an option. The EAC needs to aggressively pursue the integration agenda backed by well-developed and executed strategy that will yield the optimum benefits for all the stakeholders.” Ndahiro, noted that two quarters of the stock exchanges in Dar-es-Salaam are still owned by the government of Tanzania while the Uganda Stock Exchange is owned by government whilst it is in the process of being liberalised. He explained that Rwanda, as a newcomer, is fortunate as it learned from mistakes in countries like Kenya, and adapted. He added that Rwanda started with the stock exchange as a company limited by shares. Dr. Ndahiro says that Burundi, too, will do even better as it will learn from all the other countries’ best practices and mistakes. The Chairperson of the Council, Hafsa Mossi, noted that a regulatory framework has been agreed upon, among others. The bloc is in the process if regionalising the financial and securities market to create access to long term capital needed to spur economic development and the World Bank is facilitating the process under its financial sector development and regionalisation program (FSDRP). Ends

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EALA seeks to address obstacles to capital markets integration