CMA mulls adopting USSD code to ease market access

CMA CEO Wycliffe Shamiah

Capital Markets Authority (CMA) Chief Executive Officer Wycliffe Shamiah. 

Photo credit: File | Nation Media Group

The Capital Markets Authority (CMA) is considering developing an Unstructured Supplementary Service Data (USSD) code to open up the market to local investors without access to the internet.

A USSD code (mobile-based messaging system) would allow remote access to the country’s capital markets’ brokers, products, and information to even those using feature phones, breaking one of the key barriers that’s been limiting domestic investors’ participation.

The regulator has drawn inspiration from a similar initiative done by the Nigeria Exchange Group (NGX), which launched a USSD code in November last year, terming it a “significant advancement” in efforts to “democratise access to investment opportunities and promote retail investor participation.”

“Going forward, the regulator will consider adopting and implementing similar initiatives to grow and expand the capital market,” CMA said in the latest Market Soundness Report.

“The USSD code enables investors to closely monitor their investments regardless of smartphone access, thereby expanding the reach of capital market information.”

NGX’s USSD code allows investors to access real-time stock market information such as stock prices, listings, and indices movements, and to connect with stockbrokers to buy or sell stocks.

Latest statistics show that a lot of Kenyans still use feature phones, which may not efficiently access the internet to access market-related information, potentially preventing them from participating in the markets.

Eric Musau, executive director of research at Standard Investment Bank, argues a USSD code will enhance market inclusivity in the country, given so many people continue to use feature phones.

“Feature phones still account for 48.6 percent of the market and so it makes sense to carry everyone along in the spirit of market inclusivity,” Mr Musau told the Business Daily.

As of March this year, there were about 31.8 million feature phones in use in Kenya, accounting for 48 percent of all the phones in the country, an indication that a significant number of Kenyans still rely on the traditional devices for communication.

A recent survey of the retail investors by the Institute of Certified Investment and Financial Analysts (Icifa) revealed that “insufficient information to aid in making sound investment decisions” is among the key challenges plaguing the country’s capital markets, cited by about 57 percent of retail investors.

Their research, published in November 2022 revealed that the majority (77 percent) of investors in Kenya get market information through their own research, while 27 percent are informed through company websites and newspapers.

CMA sees the introduction of a USSD code as a significant means of unlocking access to market information, allowing increased participation by domestic investors.

“This initiative has the potential to significantly enhance market participation among retail investors, including market players at the grassroots,” the regulator said.

Foreigners currently dominate market activity in the Nairobi Stock Exchange (NSE). In the quarter to June this year, foreigners accounted for 57 percent of total equity turnover, a slight drop from 60 percent in the first quarter of this year.

Initiatives to open up investment opportunities to small-time unsophisticated investors such as this have been gaining traction lately. In May, the Central Bank of Kenya announced plans to introduce government securities denominated at as low as Sh600.

The move, which followed President William Ruto’s advice last year, seeks to open up investment in government securities to low-income earners who previously couldn’t afford the Sh50,000 threshold for bonds and Sh100,000 for Treasury bills.

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