Poverty Alleviation Through Capital Markets

Introduction:
The objective of this article is to provide an insight on how an ordinary individual can use the capital markets to get out of poverty.PovertyIn simple terms poverty can be defined as lack of income and material assets and the absence of basic needs that support life.According to the 2005 study shows that 20% of Ugandans household live in chronic poverty-The poverty report of 2008 shows that more than 7million people or 26% of the total population live in chronic poverty.Despite being at the fore front of implementing a comprehensive poverty eradication strategy, Uganda is like any other African countries, which are still struggling to get a solution to the problem.In this fieldwork I was tasked by the authority to carry public sensitization on how people of low income earners, people at grass root level can improve their wellbeing by forming investment clubs and communities that can participate in the capital markets to eradicate poverty.As it is already indicated it is true, poverty at the grass root level is at the highest level some household can not afford 2 meals a day. The expenditure per adult falls below the poverty line it is calculated on the basis of the shilling amount necessary to purchase a basket of essential foods commodities.Most people interacted with were giving answers which were all related to poverty as a main problem that denies them an opportunity to invest and save in the capital markets industry. As social worker I analyzed the broad perspective and functions of social work the agency adheres to.The agency carries public education in order to create awareness among the public to know that there is an alternative way how they can invest there money as well as saving in buying shares.CMA is also promoting developmental ideas to the public, in order to encourage people to have an alternatives means to generate income rather than depending on one source.The agency also adheres to preventive\ promotive, as one of the main tool of eradicating poverty in the public. This is to encourage people to learn how to utilize they small savings either by forming societies or investment clubs so as to participate in the buying and selling of shares.As a professional social worker, if consulted about the best perspective fitting this organisation. According to me Capital markets authority is providing developmental ideas to the public. In Uganda people have a poor culture of saving, and very few who are interested in investing in shares which have proved to be lucrative business both long term and short term depending on the market forces.The organization’s public education programme is promotive and preventive, in terms of educating people how to use the little they earn in order to accumulate wealth, and to learn how to plan for the future by investing in different economic activities.

Below is the demonstration how poor people can utilize the capital markets to fight poverty.
Unit Trust (collective investment schemes)The CIS is an alternative means of how the poor can fight poverty by pooling their small income together to form a scheme. As earlier on indicated the highest percentage of the population is engaged in subsistence agriculture, which does not earn them sufficient income. The second group is in the private sector.In order for such groups to improve in their financial status they need to form schemes or clubs where each individual will contribute the little saving in the scheme.After a month each individual will have contributed enough to invest in the collective investment scheme.The amount can be trusted to a fund manager who will invest it in shares or treasury bills on behalf of the group in order to accumulate profits for the scheme.The above demonstration shows that the capital markets can be used as mechanism, to raise funds to fight poverty.

THE SKILLS I EMPLOYED WHEN HANDLING THE TASK.
Since Capital Market authority is financial organization and the work involved is mostly economic goals, I applied the following skills.Challenging Skills: The highest number of the questions raised by the different groups and individuals I interacted with was the issue of capital to invest in this industry, and lack of unemployment so as to earn a living and to be able to participate in this industry; these are the main points that featured in this public education drive.As professional social worker I challenged my clients to be innovative and find means of being self employed as the government can not employ every citizen with the few jobs available.As social worker I advised the clients to use the opportunity of forming groups so as to access funds in micro finance institutions to be able to generate income, for example they can start projects like piggery, poultry and other economic activities that can improve they economic wellbeing.In this research the highest number of the clients interacted with, are the youth who covers the highest percentage. They have almost similar problems ranging from early school drop out, early marriage and lack of vocational skills that can enable them to be self employed. The second groups were those who have the capacity to invest but they are reluctant to invest in securities, they only consider in investing in farming and yet this kind of investment is prone to climate factors and diseases. As a social worker I challenged them, to consider in investing in financial instruments as the risks are minimal, and at times they open other avenues like accessing short and long term loans in banks and other lending instutions.

COMFROTATION SKILLS
During this public education drive some questions required confrontation skills.Mostly on poverty and what is the solution to avoid it? How can capital market assist the poor? And what are the benefits in investing in these share business?The above questions are confrontational since they demand answersIn the interactions both on individual basis and the radio talk shows I clearly informed the role played by CMA that is to promote the industry, regulate and protection of the investors. CMA intervention in solving poverty is to educate the public that there is an alternative means to improve the economic status of people by participating in collective investment schemes or buying of shares on an individual basis.Again those who buy shares in the companies that are listed on the Uganda Securities exchange benefit by being share holders that means they have voting rights on important matters in that company by being share holders.Shareholders are also entitled to a share dividend every year but this depends if the company makes profits and it may also in agreement with its shareholders decide to reinvest the profits in the company.The share holders can also benefit by selling their shares when the share price increase from its original share price, this is called capital gain.Share holders can also benefit from a share split, this is when the company shares becomes expensive or the demand for them is too high than the supply.Example given in this case is the shares of Uganda Clays, at the IPO each share was 4000 that was 2000 by 2006each share was trading at 23500 ,they did a share split and each share was 10000 it again raised to 22500 the third time the share split was put 100 current share price is 195 shillings.Bank of Baroda the price per share reached 5000 and share split brought it to 500 currently it is 900.Note the existing share holders’ benefit from the share split because the existing shares are the ones to be multiplied, i.e each Uganda clays share was splited 10 times, this allows the existing share holder to acquire more shares and he can sell and remain with the original numbers of shares.Principles adhered when handling the task assigned to me.I applied the principle of Acceptance, as a professional social worker am supposed to treat each equally without discrimination, in the field work clients of different category approached me and assisted them without grading them regardless of they age and status.Principle of IndividualisationDifferent clients that approached me in the course my field work had different questions which required particular answers that could not be applied to others, there those who preferred to be advised alone not as group for the purpose of understanding and yet some of the problems raised are similar.Client self determinationThough the public awareness campaign was geared at sensitizing the people about the capital markets as an alternative means to invest and save, we were not allowed to decide for the people,, to invest in shares but to educate them the importance of investing in different avenues that are available, again the public was informed that investing in shares involves risks like any other business. The selling and buying of shares involves the brokers who are licensed by CMA and they are members of the securities exchange (USE)This means the decision to invest in shares is left in the hands of the clients; the authority only regulates, promotes, and protects them from fraudsters.As a social worker I used social work role of an empowerer, among the objective of the capital markets authority public education is to empower people of all levels i.e low income earners to form investment clubs or groups and pool resources together so as to invest in collective investment scheme .The resources are then invested in various assets like treasury bills, shares, bonds, property, with sole purpose of generating high returns while minimizing risks through diversification of investments.In Uganda there are three types of unit trust funds in which you can invest each with different requirements The Balanced fund ; This is long term –fund whose assets allocation is mainly in long term products and securities like bonds ,shares, etc. The minimum amount required to invest in this fund is UShs 50,000 only.The High yield fund; This is a fund whose asset allocation is in medium term securities and products. The minimum amount required to invest in this fund is UShs 50,000 only.The Money fund; This is a fund which invests in short term products and securities like treasury bills, current accounts, etc. This fund is better suited for people who wish to save money over a short period of time .The minimum amount required to invest in this fund is UShs 250,000 only. To invest in CIS you contact a fund manager.Apart from social work I applied knowledge from other course units especially economics and social services.Since most CMA work is more of financial related, economics dominated the field workAnd this is determined on the questions the clients were asking, which were all geared at the alternative saving and investing to the public.Though there were other questions but all were related to one unit economics.Challenges faced during the practicum and how they were handled?The challenges that I faced during my field work were mostly to convince the people about the new ideas of investing in shares, and yet the public perceive such ventures to be for the rich who can only participate.The other problem was the way people understood the whole concept, people were relating CMA to institutions like micro finances, some micro finances have conned people their money promising to give them big loans if they open accounts with tThere was a problem of interpreting the economic language which most people failed to understand though there was brochures in local languages still an interpretation was required, even those in English still people wanted further understanding of the whole idea.During my internship at the capital markets authority, I was able to use the resource center so I was able to answer most questions, and I gave advice to those who picked interest in investing in shares. For the schools we visited it was interesting because the students learn the capital markets in the economic subject but without going in details so this was an opportunity for them. The impact I got on my life and my future career dueto the fieldwork.The fieldwork helped me to acquire knowledge in terms of financial matters and it also helped me discover the way how people can cooperate to raise funds in case of a common goal. The field work also gave me the opportunity to interact with people, and know the problems there are facing mostly in villages, where poverty has dominated the lives of the majority. Areas like capital markets is too far they concern because there not able to solve even the problems they encounter like affording proper health, enough food, and other basic needs.The fieldwork helped me to express my self in public, to be able to interact with people of different age and those with different opinion on the fieldwork I was doing it was challenging experience.Conclusion: The capital markets authority in Uganda is still its infancy, and according to me the capital markets authority has done a good job, given what is on the ground.To compare CMA Uganda with other emerging markets in Africa the progress is promisingDeveloping capital markets is an evolutionary process that takes a long time to accomplish. The process is complex it entails changing the investment culture of the entire community. Fortunately there are other emerging economies that have been successful in developing their financial markets. This means we in Uganda we can also follow the same approach to develop our market. All that is required is to enhance programmes like public education and others that have been successfully implemented in other emerging markets.Capital Markets Authority requires to find other source of funding in order to increase the public education campaign, this is evident on the ground little is known about the whole industry save for the small percentage of the population that is informed.I am convinced that the increase in dissemination of information to the public will enhance fully participation of the public country wide.Further more I suggest that Uganda Christian University Mukono should sign a Memorandum of Understanding with the Capital Markets Authority so as to include the capital markets as course unit in the university curriculum. This will help the students from different faculties to benefit from the authority in gaining knowledge, which is useful for academic purpose and the students can be taken for internship by Capital Markets. At the moment it’s only Makerere University that has signed a memorandum of understanding with the Capital Markets Authority.