The challenges and problems faced by capital markets in Uganda, and their consequences on investors. the case study of capital markets Uganda)
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Date
2006-10
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Publisher
Kampala International University, College of Economics and Management
Abstract
Uganda's impressive economic growth is a result of the country's reform process. The government is committed to private sector-led growth, which necessitates adequate availability of investment capital. However the shallow and underdeveloped nature of the financial sector is a hindrance to raising long-term finance. The ultimate role of Uganda's Capital Markets is to provide alternate means of raising long-term finance. Therefore, the government is encouraging the development of capital market industry as a way of generating long-term capital to promote sustainable growth, mobilize savings and broaden the availability of funds for investment purpose.
Promotion of capital markets provides new options for Ugandans to invest their savings from local, regional and international sources. It makes it more convenient for Ugandans to save and enhance the efficiency of the financial system to mobilize savings for economic development. It makes it also possible for larger institutional investors to enhance the effectiveness of managing their assets and liabilities, particularly with regards to the risk and reward associated with different investment.
This research project gives ideas on how the ways capital markets development creates ways for business communities to raise capital and run the business. This is possible in fact, not only these businesses get funds raised bank loans, but also by raising capital directly from the public by issuing financial instruments such as bonds, stocks to investors locally, regionally and internationally.
Mobilization of savings from savers to borrowers is conducted efficiently if there is existence of financial intermediaries (middlemen who identify individuals with surplus of money and use their money to lend people with deficit, who need money). The role of capital markets comes in to create stock exchange, which is the market, where buying and selling of securities take place. In Uganda, this place is named Uganda Securities Exchange.
There is a concern about lack of confidence in financial sector among Ugandans also the dilution of ownership and questionable shareholders.
Smaller companies in particular, fear the loss of managerial grip on their companies and the financial requirements, which is identified as an area of contention in the impediments.
This study establishes why there are a number of local firms that are interested in going public but that there is a considerable degree of reluctance of going ahead. This attitude may correspond to the low level of awareness of the securities market among Ugandans companies.
This research also shows reasons and causes of lack of participation of the population in the investment opportunities, the challenges of capital markets, and later it will give recommendations and suggest measures that can be taken in order to overcome them.
Description
This Research Project is submitted to the School of Business and Management in Partial Fulfillment of the Requirement of the Award of the Degree of Bachelor of Business Administration (Finance) of Kampala International University
Keywords
capital markets, Uganda