In 1836, New York became America’s financial epicentre overtaking Philadelphia, which had the privilege of hosting the first charter bank and an established stock exchange.
Whereas New York has captured the financial hub status in North America, other continents have established financial and leadership centres of excellence.
Through collaborative efforts between the Central Bank of Kenya, the Capital Markets Authority and other relevant regulatory bodies, Nairobi will undergo transformation through formulation and adoption of agreed and inclusive policies.
Recently the Kenyan government began a drive to transform Nairobi County into a regional and potentially continental financial hub.
This would mean that the city would be at par with notable hubs such as London, Hong Kong, Dubai and New York. Although this initiative is ambitious and achievable, the journey to transform the city will not be easy because it requires a combination of factors to be at play. So, what must Kenya do to achieve such status?
In 1836, New York became America’s financial epicentre overtaking Philadelphia, which had the privilege of hosting the first charter bank and an established stock exchange.
New York’s recognition as a major pipeline for commerce and trade propelled it to set up adequate and modern infrastructure, legislate and pass favourable international business policies and establish frameworks that support creativity and innovation to market the region as a global financial hub.
Since then, New York’s towering global financial hub status has provided convenience and scalability to investors and multinational organisations.
Picture this: a start-up interested in expanding operations in emerging markets can get research, advisory and clearing services, explore several financing and risk management options, consult on possible mergers and acquisitions and enjoy quick, effective and efficient cash transfer services all in one centre.
Liquidity, a critical factor in business, is a major selling point to investors and international financial hubs strive to assure potential investors that their markets have sufficient cash flows.
Whereas New York has captured the financial hub status in North America, other continents have established financial and leadership centres of excellence. Notably, London is considered the financial juggernaut of Europe while Hong Kong and Dubai represent Asia and Middle East respectively.
Nairobi, in retrospect, has already established itself as a regional centre for trade, technology and commerce. Its competitive edge lies in having a diverse and modern finance ecosystem, tech infrastructure and rich culture, which sets the pace for this development.
In addition, with the presence of trading platforms, above-average banking systems, impressive infrastructure developments and a befitting geographical location, Nairobi has the foundation necessary to establish itself as a global financial hub.
Investor confidence
Through collaborative efforts between the Central Bank of Kenya, the Capital Markets Authority and other relevant regulatory bodies, Nairobi will undergo transformation through formulation and adoption of agreed and inclusive policies.
The Capital Markets Master Plan, a document that outlines key performance indicators for the Capital Markets Authority (CMA), is under review after falling short of delivering key results.
The document envisions a developed structure with emphasis on three pillars considered as the building blocks of the capital markets. These include: the support for developmental and economic transformation, the infrastructure of the market and the legal and environmental environment.
It is salient for the CMA to achieve its targets, failure to which will be detrimental to investor confidence in the region and daunting to transform the city into an international financial center.
For instance, it was expected that the ratio of outstanding corporate bonds to GDP could reach 40 percent by 2023 from less than one percent in 2014. It was also anticipated that the ratio of equity market capitalisation to GDP would attain the 70 percent mark in 2023 from 50 percent in 2014.
Through the flagship initiative under the blueprint Vision 2030, the Nairobi International Financial Centre Act 2017 was enacted to help address challenges.
As Nairobi strives to connect its systems to the global economy, the probability of certain emerging risks occurring increases exponentially. Money laundering has grown over the years as nations pursue economic prosperity and wealth generation.
The discussion on the development of the Nairobi International Financial Centre have proved insightful and feasible. It is also commendable that the relevant regulatory authorities have expanded frameworks that will act as a guide towards this cause.
Elizabeth Nyingi, via email
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