Developing domestic capital markets crucial for long-term growth – Kobby Enchill

The Head of Investment Banking at Stanbic Bank Ghana, Kobby Bentsi-Enchill, has underscored the need for the country to pay close attention to developing its domestic capital markets. Speaking at the official listing of Bayport Savings and Loans’ Bond Issue at the Ghana Stock Exchange, Mr. Bentsi-Enchill said such a move will ensure long-term growth prospects and build economic resilience.

He said “Recent events, both domestic and global, have taught us to pay closer attention to developing our domestic capital markets, simply because when there is a flight of foreign capital, occasioned by a domestic market crisis or a global financial meltdown, invariably it is the emerging market countries that suffer the brunt of this capital flight.

The effect of such capital flight is often a sharp rise in interest rates, rapid currency depreciation, and spiraling inflation in the domestic economy leading sometimes to severe recession. Access to credit via traditional bank financing is also reduced during periods of economic downturn, and so the availability of a reliable alternative source of funding via the capital markets is what ultimately shores up an economy and ensures its long-term sustainability and growth prospects.”

He added that “The quest to develop our domestic capital markets is therefore not only self-serving but also ensures our long-term growth prospects whilst helping to build economic resilience. It is therefore imperative that all stakeholders, be they investors deploying long-term capital for economic returns, prospective issuers requiring capital to drive economic activity and growth, or regulatory authorities who provide an enabling environment for thriving capital markets, all work together in tandem to achieve a well-functioning capital market.”

On March 28 this year, Bayport Savings and Loans successfully closed its GHS 50 million 2-year senior unsecured floating rate note issuance, being the first series and tranche of notes under the company’s newly established GHS 500 million medium-term notes and bond programme. Stanbic Bank acted as the Lead Arranger for the transaction.

In spite of the economic uncertainties, the order book for the transaction peaked at almost GHS 70 million, allowing Bayport to close books at a 1.37x subscription rate, and price the issue at a spread of 145bps to the 182-day Treasury bill benchmark rate. This represents the most competitively priced issuance by Bayport Ghana in its 5-year history of accessing the domestic capital markets.

The order book also saw participation from a diverse pool of investors, which is indicative of the confidence they have in the Bayport credit story.