Regulatory Framework Of The Capital Market In Uganda: An Overview
Abstract:Capital markets are platforms where investors trade in long-term financial products known as securities. The products include equity (shares), debt (government and corporate bonds), derivatives of these products and units in collective investment schemes. The capital markets are an important component of a modern economy because they facilitate access to long-term patient capital which may not be accessible from traditional sources such as commercial banks. There have been concerns about low investor participation in the capital market over time at the Uganda Exchange. Even though the Foreign Direct Investment portfolio has shown increased growth to about USD 1.1 billion in the first quarter of 2023 this has not translated to increased activity in the capital market showing that several investment opportunities were being externally financed. It is well-known that businesses need to attract funding from investors to supplement internally generated resources in other to expand and grow. This study is an overview of the regulatory framework of the capital market in Uganda with the objective of unraveling the inherent constraints in the system to its growth deriving therefrom. The study found that there is a low level of awareness of the securities market among Ugandans and its corporate entities on the one hand and a manifest reluctance of domestic and foreign companies to participate in the capital market on the other as well as a stranglehold of government on financial drivers owing to weak regulatory and policy frameworks. It recommends a legislative overhaul of the framework to entrench governance best practices, strengthen free market operation and a formalized enlightenment regime.
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