Connecting capital markets: the Nairobi Security Exchange Growth Enterprise Market Segment

This paper draws on interviews with Nairobi Security Exchange (NSE) officials as well as coverage in the African and international financial press to tell the story of the Growth Enterprise Market Segment (GEMS), the Nairobi-based board targeted at small and medium-sized enterprises. It is part of a series of ACCA case studies looking into the shared experiences of regulators, exchange operators, investors and listed firms in emerging capital markets.

Since the global economic downturn began in 2008, it has been clear that the world must look to the emerging economies of Africa, Asia and Latin America for growth. If emerging markets are to live up to their promise, businesses in these regions will need to be able to finance themselves more efficiently, and from multiple sources, as they continue to outgrow the narrow savings bases of their home countries and their still-developing banking systems.

ACCA’s research shows that the accountancy profession is instrumental in capital market development, which can be stunted or unbalanced without its support. As preparers, users and auditors of financial reports, accountants have an interest in upholding confidence in the rules, and educating firms and investors where appropriate. As global as the capital markets themselves, the profession is an established network well suited to the task of conveying good practice around the world.

As the most global of the professional accountancy bodies, ACCA is most acutely aware of these responsibilities of the profession. Nearly half the ACCA members in non-OECD countries (48%) work in regional or global financial centres, some in positions of authority that actively shape market development. Through ACCA they have access to an unparalleled network of local know-how that can guide the development and integration of capital markets and promote their healthy function.

ACCA’s ‘Connecting Capital Markets’ series focuses on significant moments in capital market development and collects the experiences of the regulators, exchange operators and investors that made them possible. Its aim is to start a range of conversations on what different markets can learn from each other, and to prompt greater collaboration.

The first paper is a case study focusing on the birth of the Growth Enterprise Market Segment (GEMS), a segment of the Nairobi Securities Exchange (NSE) set up to serve small and medium-sized issues. The case study is based on secondary research as well as an interview with NSE officials, carried out in July 2013. The author is extremely grateful to the NSE for their insights and assistance. Apart from direct quotes, all views, including any errors and omissions, are the author’s alone and should not be attributed to the interviewees or to ACCA.