Thursday, November 30, 2023

The Forex Market in Kenya

When it comes to forex trading in Africa, countries like Kenya tops the list for having numerous active traders. Forex trading is totally legal in Kenya, and it’s regulated by the government financial regulatory body, the Capital Markets Authority of Kenya (CMA).

Although it’s not required for the brokers to be authorized by CMA, it’s highly recommended to get the same as it denotes credibility. Speaking of the forex market in Kenya, you must be curious about how things work and what are the rules and regulations regarding the activity. Here’s a quick brief up:

Role of CMA

Before we move on to other essentials, let’s know about the regulatory body that regulates forex trading in Kenya, that is, the Capital Markets Authority of Kenya (CMA). CMA holds the authority to manage, control, and license the forex brokers in Kenya.

They regulate the forex brokers and ensure genuineness, so traders can stay protected from any fraudulence. CMA’s responsibility is to ensure a fair and efficient capital market in Kenya while maintaining market integrity and confidence among investors.

Statistics and Facts of Forex Market Kenya

  • There are about 100,000+ retail forex traders in Kenya currently, and the numbers are increasing with time.
  • Despite the popularity of crypto trading around the world, forex trading remains the top choice for Kenya and other African countries when it comes to trading activities.
  • As of December 2022, Kenya’s forex exchange reserves amounted to 12084.70 USD Million. There was a slight increase in the values from November 2022, where it was 11407.70 USD Million.
  • South Africa, Nigeria, and Kenya are ranked top in the list of highest retail trading volume in the last five years in Africa.
  • In 2017, Kenya became the second African country to have a regulatory authority, CMA (Capital Markets Authority), for online forex trading.
  • The top currency pair in Kenya for forex trading is EUR/USD.
  • As for rules related to tax on forex in Kenya, if you have net gains from offshore forex trading activities, you must consider it as income on your tax returns.
  • About 60% of the trader’s accounts are from Africa, Eastern Europe, and Southeast Asia.

Law of Forex Trading in Kenya

In 1993, the Central Bank of Kenya invalidated the currency controls regulated at that time. They allowed both residents and non-residents to do forex trading, but they had to be connected with the authorized dealer. The transaction should be up to $10,000. If someone wants to go above $10,000, they must mention the purpose of the transaction.

The CMA also came up with capital requirements, ranging between 30 to 50 million shillings. Note that it was dependent on the broker and whether they were a non-dealer or a market maker. There was no restriction for trading CFDs or contracts for difference, however, a limit was set at 1:400 for leverage, which was provided by the genuine and licensed brokers.

What’s the Reason Behind the Popularity of Forex Trading in Kenya?

Forex trading has gradually become quite popular in Kenya due to various reasons. However, the initial reason behind its popularity remains the economic growth of the country. In recent years, the Kenyan economy has bloomed vigorously, and this has resulted in active forex trading in the country.

As forex requires way less capital than other investments like stocks and bonds, it’s also a fairly convenient option for people to try out. Besides that, forex trading is known for providing higher returns on investment. Ofcourse, you will need a better grip on forex basics, good investing strategies, and a lot of practice, but once you know what you are doing, there is no looking back!

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Flexibility is another strong reason why forex trading is so dominant in Kenya. As online forex trading allows you to trade from any location and any time (thanks to online modes), people are more drawn towards it lately.

Additionally, there are multiple currency pairs that you can trade for in forex trading in Kenya. This opens the door to future opportunities and greater potential to make profits.

Final Note 

So, this was all about the forex market in Kenya. Note that, despite the growing popularity of forex trading in Kenya, you must stay aligned with the rules and regulations that are required to be followed. Also, it’s important to stay familiarised with the risks and the do’s and don’ts of investing it right.

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