The East African Forum for Structured Products (EAFSP), a membership association established by promoters and issuers of structured products in Sub Saharan Africa, launched in April with the aim of providing a unified voice for its members, working with financial advisers, regulators, investors and other affiliated bodies.
SRP spoke to the East African Forum for Structured Products' (EAFSP) coordinator Lawrence Njuguna (pictured) about the association's mandate to engage with regulators, educate the investment community, provide a useful source of information for financial advisers and develop best practice guidelines for structured products and the alternative investments industry in general.
The association was launched in late 2017 with the aim of filling a gap in the market with a body that would provide a voice to the structured products industry in the region, according to Njuguna. "The structured products market in Africa is not as developed as in other regions such as Europe or Asia-Pacific, but these products are getting increasing interest as they can be used to meet the funding needs of corporates and can also respond to demand for alternative investments from investors," said Njuguna.
Although a number of African markets have shown some activity around structured products, the Pan-African market "is in its infancy and there's a need to promote and educate investors so that they can understand how and when to use these products", according to Njuguna. "That's why the main goal of the association is to raise awareness of structured products and alternative investments in East Africa at through advocacy and investor education," said Njuguna. "In a second stage, we want to engage with regulators and the wider industry to create a regulated framework for a sustainable market."
The trade body celebrated its first ever conference in April 24 with a focus on structured finance, and the forum "provided an opportunity to talk about structured investments and structured finance with real state companies, developers and landowners seeking opportunities to fund their activities", according to Njuguna. "We wanted to provide a forum for these companies to engage with investment banks and asset managers," he said, adding that the content of the conference and the presentations were very helpful to start a discussion and find out about the investment and funding needs of these companies. "The feedback from attendees was also very positive and this makes us believe that there is an interest from corporate investors and companies seeking funding to use structured products and structured finance, and that the association can play a leading role in bringing the industry together."
The association is looking closely at the South African market as a model to develop other domestic markets in the region and it's already in talks with Cytonn Investments Management Plc and Standard Investment Bank, according to Njuguna. "We're lagging behind South Africa but there is demand from investors across the whole region, and we can help to coordinate efforts and go in the right direction to achieve well-functioning structured products markets," said Njuguna. "African investors are looking for alternatives, and we think equity-linked products are under-represented in the region."
Only a handful of asset managers are offering structured products in the region "but their reach is limited and their target market is high-net worth individuals (HNWIs)," according to Njuguna. "We want to make these products mainstream and help expand the investor base to corporates and also retail," said Njuguna. "We are also looking at expanding the membership of the association with manufacturers (investment banks) and distributors (asset managers), and we will also seek partnerships with firms covering the region to leverage and build on their knowledge and expertise."
The association wants to educate distributors and investors about the benefits of structured finance and structured products, and how to use them efficiently, "but first we need a regulatory framework that enables providers and distributors to operate and offer these products with the approval of regulators", according to Njuguna. "There are challenges ahead but we remain positive because there is increasing demand from investors for alternative ways to fund their activities and reach their investment goals. "There is an opportunity in the region and we want to replicate what we have seen in other markets."
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