Monday, March 25, 2019

IFC works with Sebon to educate investors in local shares

IFC – a member of the World Bank Group – has partnered with Nepal’s securities market regulator to educate investors from rural communities about the risks and benefits of purchasing local shares in hydropower projects.
The education sessions in Rasuwa and Solukhumbu this week were targeted at local officials and civil society leaders, womens’ groups, and community members, the IFC said in a press note. "They follow similar successful events held in Lamjung and Dolakha in December 2018."
The joint session includes a presentation by IFC on the findings of its study 'Local Shares: an in-depth examination of the opportunities and risks for local communities' seeking to invest in Nepal’s hydropower projects that was published in September 2018, followed by a session by Securities Borad Of Nepal (Sebon) the securities market including buying, selling and trading of shares, and the risks and rewards of investing.
Despite an ongoing demand for equity participation in hydropower projects in Nepal, the risk associated with purchasing local shares is not well understood by the majority of investors, whose decision making is often driven by hearsay and the advice of family and friends. This is reflected in the IFC study as well as in the education sessions in Lamjung and Dolakha, where the majority of participants had the expectation that local shares are guaranteed to generate a profit. 
“There was a lot of rumor flying around that investing in shares will be lucrative," according to Man Maya Gurung of Lamjung. "So I put in Rs 40,000 of my savings without much thought," she said, adding that she only wished I had gotten to attend such a programme before she invested savings. "We need more of such programmes.”
To help address these gaps in investor knowledge, Sebon conducts dozens of education sessions every year aimed at potential shareholders, especially those in poor and vulnerable communities.
“Many investors take loans or use their savings to purchase local shares," executive director and spokesperson of Sebon Niraj Giri said, adding that it’s important they have realistic expectations for returns. "Through education, and securities market reform, we can improve their access, and increase their chances to share in the benefits that hydropower can bring to their communities."
Among the reforms initiated by Sebon to make the securities market more transparent and investor-friendly are an online trading platform, where shareholders can buy and sell with minimal transaction costs. Companies will also have the option to raise capital from the general public ahead of a local shares offering, giving poor investors more time to arrange for financing. IFC has identified both the problems as key recommendations in the its study.
"We’re pleased to be working with Sebon to bring the findings of the local shares study back to the communities who contributed to the report," IFC’s country head in Nepal Mohammad Rehan Rashid said. "In addition to this investor education, the report recommends tightening up the eligibility criteria for local shares, putting in additional safeguards for vulnerable investors, especially women, improving the transparency of information to potential shareholders, and the consideration of alternate delivery models for private companies," he added.

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