On Friday, the Gambian government launched the first-ever Capital Market designed to strengthen the country’s economic development and be the start of a dynamic paradigm shift in deepening the financial and investment ecosystem in the country. 

Speaking at the launch held at the SDKJ Conference Centre in Bijilo, the Minister of Finance and Economic Affairs, Seedy Keita 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 vibrant capital markets.

Keita noted 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 added that despite the existence of over 13 commercial banks in The Gambia, the private sector does not have adequate access to credit facilities. He continued by saying that the government is acutely aware of these problems that plague the current financial system and restrain the growth of our productive sectors.

He asserts that historical data demonstrates that less than 10% of deposits are disbursed as short-term (3-year) credit at outrageous interest rates of up to 20% and higher. “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, mobilization of foreign capital, and facilitate a more effective allocation of resources into long-term productive investments,” he added.

In addition, according to Buah Saidy, the governor of the Central Bank of The Gambia, capital markets help with price discovery in the case of traded instruments and improve disclosure through seamless information exchange between economic agents. The financial markets, he continued, promote efficiency in resource allocation by directing long-term investments toward the areas where they are most needed.

Governor Saidy further stated “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.”