Poor regulatory checks hurting financial market growth - experts

Traders and financial experts now say the Kenyan financial market has several challenges impeding its growth. 

Financial Markets include any place or system that provides buyers and sellers the means to trade financial instruments such as bonds, equities, stocks, forex, futures and various international currencies.

Online Trading Campus CEO Bernd Skorupinski having traded in the financial market for more than a decade said lack of capital is one of the factors hindering more people from joining the space. 

"At the end of the day to make money in the financial market you need money. You need money to make money," he said. 

Skorupinski said there is no barrier to entry into the market other than insufficient capital. 

He urged those without entry capital to learn trading skills before they finally join the market. 

"Develop skill first. Before one jumps into the market they can trade on a demo account which is not financially risky. It is very important that you set yourself in the right mindset if you want to become a trader," he said.

Brokers usually offer demo accounts that simulate the real market environment on their trading platforms. 

It is not financially risky as traders use virtual funds instead of real money. 

Additionally, Skorupinski said the financial market space lacks credible training on trading. 

He noted that the space also lacks an accreditation formula. 

"Think about it, to drive a car you need a driver's license. To become a doctor you need to go to school. For every profession out there you need a proper accreditation system. But trading is the only profession in the world that anybody can just go out there, open up a trading account and start trading," Skorupinski said. 

The lack of credible accreditation, according to Skorupinski, leaves new traders not knowing who to trust upon entry into the financial market. 

He urged new traders to seek trading results from other traders to know their credibility. 

"If somebody is online and offering some kind of education on trading and doesn't have some verified results, then it is very likely this person is a fraud or scammer," he said. 

According to the 2023 Absa Africa Financial Markets Index, Kenya's financial markets standing dropped from sixth position in 2022 to seventh in 2023. 

This was blamed on the country's foreign exchange troubles tied to dollar shortages and a fall of forex reserves.  

FX Pesa Senior Account Manager Jesse Ogola added that another factor hindering the growth of the financial market is that financial literacy is not well entrenched in Kenya. 

However, he noted that in the last six to 10 years, FX Pesa has seen a lot of interest in financial markets. 

"Last year we had a target to reach at least 1 million people on financial literacy, which we were able to achieve through different platforms," Ogola said. 

Further, Ogola said there are risks in the financial market such as impersonation which he termed as very dangerous. 

"In Kenya, the main regulator is the Capital Markets Authority of Kenya. They make sure that the players in the industry of online trading markets abide by certain rules. For example, you must be over 18 years of age and it is illegal to trade for another person," he said. 

Fortunately, he said there is a mechanism to report fraud in the financial market. 

"For us, once we notice someone else is trying to access your account, there are a couple of measures put in place to prevent that from happening. The most important being we do not accept third-party deposits and so we will not send money to a third person who is not registered with us," Ogola said. 

He said there is also a law that ensures funds are segregated. 

"What you put with us for trading is now what the company uses for operation," he said.