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VII G. Strengthen Education: PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA

Guest post by: International Monetary Fund

Article Overview: Increasing public knowledge about the functioning of the stock market could promote the development of the stock market in Africa.

VII G. Strengthen Education: PROMOTING STOCK MARKET DEVELOPMENT IN AFRICA

Increasing public knowledge about the functioning of the stock market could promote the
development of the stock market in Africa. Knowledge about stock market activity can be
improved through regular and intensive education programs. Educating the public about the
role of the stock market can help increase the investor based and improve the liquidity of the
stock market. There is often very little or no education on the role of stock markets in African
economies. Being new financial systems in most of Sub-Saharan Africa, stock markets would
not appeal automatically to economic agents. Education about stock markets must be at the
firm and individual level. At the firm level, it is important to allay the fears of firms by
educating them strongly and regularly on the benefits of listing. Firms in Africa have an array
of reasons why they would not list on stock markets. Apart from the lack of knowledge about
how stock markets work, there are other reasons such as high listing requirements and fear of
losing control over family businesses. A study on the Ghana Stock Exchange (Yartey, 2005)
revealed that 33 percent of firms surveyed were unwilling to list on the stock exchange
because of fear of losing control. At the individual level, African markets could tap into
potentially large amounts of financial wealth which exists outside of the financial system, by
pursuing vigorous and consistent educational campaigns about stock markets at various levels of society. Such educational drives are already in existence in a number of stock
markets in Africa. In South Africa, the JSE/Liberty Life Investment Challenge which
introduces the youth to dynamic games in economics and finance and its application to
investing and trading on the JSE has been running for three decades now.

IMF Working Paper
African Department
Stock Market Development in Sub-Saharan Africa: Critical Issues and Challenges
Prepared by Charles Amo Yartey and Charles Komla Adjasi
August 2007

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Article Tags: african economies, african markets, critical issues, dynamic games, economic agents, educational campaigns, family businesses, fear of losing control, ghana stock exchange, intensive education, investment challenge, lack of knowledge, liberty life, life investment, public knowledge, stock market activity, stock market development, stock markets, sub saharan africa, three decades



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