Apathy of Malawian Indigenous Citizens on Capital Markets

Abstract

Capital markets are catalysts for economic growth and wealth creation for both investors and investees. Vibrancy of capital markets comes in when demand and supply of capital is high. That is, investors’ returns are attractive and the investees’ objectives of accessing cheaper capital are met. The free-market economy principles should therefore be basis of capital markets to dictate both and equity and debt instruments.

Malawi’s capital market is still at an infancy stage despite being operational for about twenty five years. Critical evaluation reveals that this could be attributed to the fact that it is wholly owned by government and the central bank continues to roll out policies which might not be in line with the demand and supply tenets.

The results of this study indicate that equity instruments market is not ideal for indigenous citizens in view of the low dividend payouts, meager capital gains and weak laws to protect insignificant numerous minority shareholders. On the other hand, the debt instruments market despite being inactive with weak secondary market, provides meaningful returns to investors and could be a good source for long-term cheap capital for companies and government agencies such as state owned entities, local authorities and other quasi bodies. There is need provide civic education to indigenous people to invest in municipal bonds for capital projects such as roads, schools, hospitals rather than borrow from development partners and other lenders.