Businesses want review of stringent bond market rules

Most organisations, particularly financial institutions, fail to raise capital through bond markets due to stringent conditions and expensiveness of the business.
Speaking in an interview yesterday at the just ended workshop on microfinance regulatory environment and financial inclusion, industry experts said the process of raising capital through capital markets is too cumbersome.
“Many organizations are afraid of involving themselves in the process since it needs a lot of disclosure of company information,” Pride Tanzania Limited managing director James Obama said.
He said the process also involves a lot of costs, which many firms find it unnecessary to go by.
He said for more firms to take part in the bonds market there is a necessity to revise the conditions.
“This is the best way to allow most companies which are ready to raise capital through capital markets to do so,” he said.
He said authorities in Tanzania should borrow a leaf from Latin America and India where they have made this business simpler for firms to raise capital through bonds.
According to him few countries in East Africa have enabled microfinance institutions to raise capital through capital markets.
In Tanzania we have Pride Tanzania Limited and Kenya has only one firm, while the rest in the region do not have a single institution.
He said capital markets play a crucial role in people’s development and the economy in general.
This is the easiest way to get loans and use them for venture expansion; hence it enables financial services to reach more people, especially in the rural areas.
Another banking executive, Abby Y. Ghuhia, said financial capability has been a deterrent to many financial institutions to seek capital through capital markets.
There is a need to revisit all charges imposed for corporate entities intending to secure loans through capital markets and make them affordable.
Ghuhia, who the Managing Director of Mwanga Community Bank, also said the area is not so much exposed to the public.
The Capital markets authorities should continue with their efforts to educate people, especially firm shareholders on its role.
He said that would enable them to advise their firms correctly on how raise funds through capital markets.
However he stated that some financial institutions become hesitant to raise capital through bonds because they do not have many borrowers.
The point is how could spend the capital raised through bonds while most of their shareholders are lower income earners, he stated.
He urged the government to address the challenges facing the development of financial services in rural areas.
Some of the challenges include poor infrastructure, technology and incentives to the staff.