The need to reshape youths’ perceptions of the capital markets

Photo credit: Shutterstock | Nation Media Group

The youth form the largest proportion of Kenya's population, and are, as such, a critical cog in the country's economy. 

While the unemployment rate among the youth in Kenya is at 16.3 percent (August 2022 data), those who have managed to secure jobs find themselves in a persistent quest to look for alternative ways of earning extra income to meet the rising cost of living. They tend to look for avenues with quick returns. One such prominent avenue currently is sports betting, particularly on football.

However, it is important that they consider more assured alternatives. Hence, the Capital Markets Authority (CMA) continues to raise awareness among the youth across the country, so that they know more about saving and investing through the capital markets. Towards this, the Authority is implementing several initiatives that specifically target the youth. The aim is to direct their attention to profitable investment opportunities.

One of the more recent initiatives by CMA is the development of the Capital Markets Mobile App, which can be downloaded from Google Play. The app has an edutainment element to particularly attract the youth. Its aim is to provide pertinent capital markets information to the public.

The application has been developed further to link all market intermediaries. This offers access to the market and is driven at facilitating uptake of products.

The application has features such as information on the different investment products available; links to all the market intermediaries participating in the capital markets, i.e, stockbrokers, investment banks, fund managers, Central Depository and Settlement Corporation (CDSC), real estate investment trust (REIT) managers, etc. It further enables investors to open trading and CDS accounts with the market intermediaries.

CMA also leverages technology by holding virtual events, which are always open to the public and industry stakeholders. The events help to increase capital markets awareness while promoting further developments.

Market intermediaries are invited to participate by showcasing their products and services through breakout rooms that are allocated to them on a first come, first served basis. This is impactful, as it creates awareness on capital markets investment opportunities, regulations, and products. These initiatives provide the youth with avenues to learn quite a lot from the market intermediaries.

Furthermore, the Authority also recently involved the youth by advertising for the CMA Fintok Challenge on different social media platforms as part of the World Investor Week 2022. The challenge is meant to be a creative and fun-filled learning experience for the youth. By participating, the youth get to learn more about capital market products. They also get a chance to win cash prizes and invest that money in capital market products.

Additionally, the regulatory Sandbox has also been an effective avenue for CMA to support the youth who are interested in FinTech. It allows for live testing of innovative capital markets-related products, solutions, and services, with the potential to deepen and develop the capital markets prior to launching into the mass market.

We cannot, however, overlook the fact that there are misconceptions about investing in capital markets.

One, capital markets do not require large amounts of money to invest in. The youth can pull their resources together and form youth investment groups with a view to participating in the capital markets. The Collective Investment Schemes (CIS) and the Money Market Fund (MIF) are products in the capital markets that are suitable for such arrangements. These are investment vehicles that pool resources of many small savers to generate a large pool. The resources are then invested in various assets like shares, bonds, property and treasury bills, with the sole purpose of generating high returns while minimising risk through diversification of investments. Furthermore, the investors have no reason to worry about the day-to-day management of the investment, as this is controlled by a fund manager. In return, the investor receives shares or units that represent his/her pro rata share of the pool of fund assets.

CIS offer potential opportunities for retail investors to access the capital market. They are also quite affordable, as one can invest with as little as Ksh100.

Given the youth’s preference for liquidity, stability, and security of capital invested, investing in equity funds also offers a diversified investment option, typically for a minimum initial investment amount. Investors are able to increase investment through rights shares, should a company wish to raise additional capital in equity markets.

MMFs are also an excellent starting point for the investment journey. They are critical in developing an investing culture among young people, who will then broaden their horizons and diversify their portfolios into various asset classes over time. They also offer relatively high returns to investors than traditional savings accounts. They experience low volatility and are less prone to market fluctuations.

MMFs are also more liquid than other investments with similar returns because they allow you to withdraw cash or buy other investments quickly. It is an ideal investment option for money one intended to use to meet short-term goals. These may include school fees, investment group funds, car mortgage, and others.

Written by Education, Awareness and Certification Department staff of the Capital Markets Authority

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