The initiative will be the start of a dynamic paradigm shift in deepening the financial and investment ecosystem in the country, according to authorities.
Speaking during the launching held at the SDKJ Conference Centre in Bijilo, Seedy Keita, the minister of Finance and Economic Affairs, explained that along with the critical reforms currently being undertaken by the government to strengthen public financial management and innovative financial instruments, evidence has shown that countries cannot reach high levels of socio-economic prosperity without placing significant importance on introducing innovative financing mechanisms beyond the traditional sources of financing available today, which is enabled by the existence of robust and vibrant capital markets.
He stated that The Gambia’s financial architecture has been limited since independence, and is unable to meet the financial and economic needs of the country and her citizens for sustainable economic growth, poverty reduction, and human and physical infrastructure development.
“Since independence, the financial architecture has been predominantly made up of insufficient access to long-term financing; underdeveloped private sources of capital provided mainly by commercial banks; limited foreign direct investment – constrained by the small size of the economy, low incomes, small population size, challenging risks and high costs of doing business,” he said.
Minister Keita continued that the government is critically aware of these issues that plague the current financial system and inhibit the growth of our productive sectors, adding that despite the existence of over 13 commercial banks in The Gambia, the private sector lacks sufficient access to credit facilities.
According to him, some historical data shows that less than 10% of deposit is given out as short-term (3 years maximum) credit with exorbitant interest rates of up to 20% and beyond.
“Hence, deepening the financial sector and expanding financial intermediary in the form of a capital market can be beneficial to The Gambian economy because it will allow for greater pooling of domestic savings, better risk sharing, mobilisation of foreign capital, and facilitate a more effective allocation of resources into long-term productive investments,” he added.
Buah Saidy, the governor of the Central Bank of The Gambia, also stated that capital markets do not only facilitate the mobilization of long-term savings and investments but also assist in price discovery in the case of traded instruments and enhance disclosure through perfect information flow between economic agents. He added that the capital markets engender efficiency in resource allocation, through the channelling of long-term investments into sectors where they are most needed.
“Capital markets are a significant source of financing for the corporate sector and play an integral role in economic growth. Equity markets are of prime importance for economic development. More liquid stock markets – where it is less expensive to trade equities – reduce the disincentives to investing in long-duration projects because investors can easily sell their ownership interest in the project if they need their savings before the project matures,” Governor Saidy stated.