The Future of Investing: AI and Capital Markets in Developing Countries

Artificial Intelligence has the potential to redefine the future of investing globally, but what does that future look like for developing countries like Kenya? As AI-driven financial tools reshape capital markets in developed economies, Kenya and other developing nations must grapple with the challenges of adopting these technologies. With the right strategy, however, AI could help unlock the full potential of Kenya’s capital markets, increasing efficiency, inclusivity, and investor participation.

Benefits to the market

Typically, investors on Kenya's stock exchange are wary of the scarce and low trading volumes available as well as the limited access to real-time information. The integration of AI will enable investors to use the large pool of available data for information-based decision-making and increase participation from both local and foreign investors in the market.

AI is not limited to the optimization of the capital markets; it is also a means of financial inclusion. Uniquely designed AI-enabled investment platforms can be useful to attract and retain investors. Investment apps like Dosikaa can integrate AI in several ways to enhance functionality and user experience.

It can be used for algorithmic trading, allowing users to automate their trading strategies. This makes the trading process more efficient and eliminates the need for constant monitoring. Additionally, AI can analyze vast amounts of historical and real-time data to identify trends and suggest investment opportunities that align with a user’s risk tolerance and goals.

Developing countries however are lagging in adapting these technologies. The lack of reliable infrastructure and hesitance to adopt AI poses a barrier to widespread AI adoption. Additionally, the regulatory environment in Kenya must evolve to keep pace with AI advancements in trading, market surveillance, and investor protection.

For instance, regulations governing algorithmic trading will need to be strengthened to ensure that AI-driven systems do not lead to market manipulation or flash crashes. This will require collaboration between the Capital Markets Authority (CMA), financial institutions, and technology firms to establish a balanced regulatory framework that encourages innovation while safeguarding market stability.

A Vision for the Future 

AI will undoubtedly shape the future of investing in Kenya and other developing nations. For AI to thrive in the Kenyan market, a multi-stakeholder approach will be required. Financial institutions must invest in reskilling their workforce to manage and operate AI systems, while the government should prioritize infrastructure development and create a regulatory environment that promotes responsible AI use.

If successfully implemented, AI can help Kenya achieve a more efficient, inclusive, and vibrant capital market, driving economic growth and positioning the country as a financial hub in East Africa.

By addressing key infrastructure and regulatory concerns, Kenya can leverage AI to unlock new levels of market participation and economic development. The future of investing in Kenya is bright, but it requires forward-thinking strategies that prioritize innovation, inclusivity, and technological advancement.

What is the biggest challenge to adopting AI in Kenya’s capital markets?

• Infrastructure
• Regulatory Environment
• Skill Gap
• Low Financial Inclusion