Forex trading or foreing exchange trading is an international market, which is used for buying and selling currencies. The traders are using the forex platforms in order to gain profits based on exchange price changes. There are two types of forex trading, institutional – banks and other big financial institutions and retail – when the private companies are suggesting the same service. When we are talking about retail trading, this is the one that is booming in Kenya right now as more and more people are trying to find fast and efficient exchange services and investment opportunities. The regulations are also giving hand to fostering transparency during the process and good governance because of the Central Bank of Kenya policy.
Forex industry in the country
SImilarly, industry participants in the currency subsector have banded together to establish an umbrella organization to govern their operations in Kenya, thanks to the efforts put in by the central bank. CEO of Kenya Forex Mohamed Nur Ali spoke on the industry’s progress from the dark days of black-market trading.
The Kenya Forex and Remittance Association was founded in 2011 as the Kenya forex bureaus association due to the liberalization of the forex market in Kenya and the introduction of not just spot transaction but also remitting of cash, which was regulated by the Central Bank of Kenya through the money remittance regulations of 2013. There are many top Forex brokers in Kenya who are very well known not only in the country but around the world as well. From the very beginning, they were given an environment that worked very well on their activities, as the regulations were not as restrictive as in many other African countries. Mohamed recalls the days of exchange controls when it was illegal to keep foreign money in Kenya. As a result, black-market foreign currency transactions flourished. In the early 1990s, Kenya’s economy was liberated from market protectionism, a policy that restricted imports from other nations. The financial market was liberalized as well, and currency bureaus began to operate in 1995.
Economic Contribution
Mohamed is proud of the industry’s progress as well as its economic contribution to the country. He points out that the sector is important not just as a source of money for the government and as a source of employment, but it also adds to Kenyans’ overall financial inclusion by supporting other economic sectors such as tourism and hospitality. Furthermore, he attributes the rise in diaspora remittances in Kenya to the ease with which services are provided and competitive currency rates, which provide citizens with more discretionary cash.
The restrictions have helped to legitimize activities and establish public trust in the sector as well as stabilize the FX market’s volatility. In general, lesser volatility in forex trading indicates lesser economic risk. Money launderers and other criminals are less likely to manipulate Kenya’s currency market now that it is more sophisticated.
Stable Shilling
Despite the fact that the government did not take special efforts to encourage the industry’s growth, they still have benefited from the government’s general policy of strengthening SMEs businesses, which also includes forex bureaus. The Central Bank also had quite a sympathetic policy towards the industry to help its development. It is also said that Kenya is a regional leader in this regard.
Kenya’s strong position has been shaped by its own people’s creativity in developing FinTech solutions. The Kenya Shilling’s strength, which has stayed constant versus the US Dollar’s De facto anchor exchange rate. The Kenyan Shilling remained robust in 2018, rising 1.3 percent versus the US Dollar to KSh 101. 3 at the end of the year, up from KSh 103.2 in 2017. According to statistics, the shilling’s stability has extended into 2019, as it continues to gain versus the US dollar and it is predicted to stay stable this year.
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