A Survey of the Microstructure of Corporate Bond Markets in Africa

Using a mix of survey and secondary datasets on Africa, we document that banks and non-bank financial institutions account for more than 85 percent of corporate bonds issued in Africa during 2000—2020, with a market capitalization of over 80 percent of these bonds. Africa’s markets have modern trading infrastructures such as automated trading systems (ATSs) and electronic depository, settlement, and clearance systems (CDSs), that are supported by the latest technology. Contrary to the notion that costly and complex issuance procedures favor private placement, most bonds are publicly issued, and exchange-listed. Curiously, issuers sparingly deploy contract features that enhance bond quality and help investors hedge pertinent risks – e.g., sinking funds, call and put provisions, and inflation indexing. The main trading session of these markets is continuous, preceded by a pre-opening call and a post-close call session. Among other market development impediments, low awareness of bond markets, market illiquidity, low listings, and small investor base are important factors governments and bourses must address to advance the growth and efficacy (robust microstructure) of corporate bond markets in Africa