Better environmental, social, and governance (ESG) market frameworks helped Kenya move up six points to eighth place out of 26 in the latest Absa Financial Markets Index (AFMI). Kenya obtained 61 points, up from 55 in the same period last year.
Kenya was lauded for making progress in sustainable finance during the report’s release in London, owing to progress in adopting ESG policies and frameworks and improving market transparency, tax, and regulatory environments in capital markets. In particular, the AFMI 2022 report recognized the incorporation of climate risks into financial stability regulation in Kenya.
Neighboring Uganda ranked highest in the East African region at fourth place, up from sixth place last year, due to strides in stabilizing foreign exchange rates as well as making long-term plans to transform the capital markets and economy by adopting international standards.
The AFMI, now in its sixth year, presents a broad view of financial market progress. The Index showed improving market infrastructure in the continent as countries responded positively to the need to develop domestic financial markets to protect economies from external shocks.
This year, coverage has expanded to 26 countries with the addition of the Democratic Republic of the Congo, Madagascar, and Zimbabwe.
Even as challenging market conditions weighed on performance in the index, 19 of the 26 countries improved their scores relative to last year. This was largely due to broad-based progress in developing sustainable financial markets, which is becoming increasingly important to global investors. Greater product diversity lifted scores for most countries too, including Angola and Lesotho, which both issued their first initial public offerings over the past year.
The index also recognizes the contribution of digital initiatives and innovations to African financial market development. While not directly influencing scores, the report highlights countries’ progress in upgrading market infrastructure, transparency, and regulation using new technologies. It sheds light on various financial inclusion initiatives that help to build a broader domestic investor base.
According to the report, continued progress on sustainability, digitalization, and financial inclusion will be crucial to improve Africa’s appeal and access for investors, enabling the continent to develop its resilience to future external shocks.