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Archive for July, 2011

A look at the Shilling

30 Jul

I have never been intrigued by exchange rates really. I had never taken the time to understand how the strength of the shilling actually affects the economy, or is it the other way round? How the economy affects the shilling on the market, whichever way it is, I have come to understand recently, that it is important to keep an eye out for exchange rates on the money markets especially if you send money abroad on a regular basis.

Obviously, you want to keep an eye out for commission charges and the commercial rates, that way you can compare the different rates and make note of any trends that might actually help you when making major decisions when sending money to Kenya.

With this in mind, I though it suitable to just get a very general perspective of how the Shilling has been doing of late.

According to Reuters Africa, the Kenyan Shilling is likely to fall against the dollar, and might even reach a new record low. The shilling has been on a downward spiral against the YS dollar for a while owing partly to the import of more than 23000 tonnes of maize at a cost of more than $100 million.

 
 

Starting a business in Kenya

26 Jul

One of the long-term goals that the Kenyan Diaspora aims to achieve is to eventually start their own businesses back home.  So I have decided to put together a list of the legal requirements that every entrepreneur must consider.  I have also taken the liberty to include some of the associated costs so you have an idea of how much you need to send back home to Kenya in order to set up and register a new firm.

  • State registration of legal entity, statistical, and tax registration with the Center for Public Registration: (cost KES 100 per name reservation)
  • Stamp the memorandum and articles and a statement of the nominal capital: (Will cost 1% of nominal capital + KES 2,020, stamp duty on Memorandum and Articles of Association
  • Pay stamp duty at bank: You will need to pay KES 100 for bank commission)
  • Declaration of compliance (Form 208) is signed before a Commissioner of Oaths /notary public: (cost KES 200)
  • File deed and details with the Registrar of Companies at the Attorney General’s Chambers in Nairobi: (cost  KES 6360)
  • Register with the Tax Department for a PIN and VAT online: (no charge)
  • Apply for a business permit: (cost KES 5000)
  • Register with the National Social Security Fund (NSSF): (no charge)
  • Register with the National Hospital Insurance Fund (NHIF): (no charge)
  • Register for PAYE: (no charge)
  • Make a company seal after a certificate of incorporation has been issued: (cost between KES 2,500 and KES 3,500)

This by the way is just the beginning; a brief checklist that you need to go through to ensure that you have all the required documentation to ensure that you do things in a completely legal way

 
 

China in Kenya

25 Jul

The relationship between China and Kenya has deepened in the recent years as the mutual social, economic and political trust has increasingly enhanced.

China’s presence has been specifically felt in the terms of investment made by the Chinese into this vibrant African economy by means of sending money to Kenya to fund investment in different sectors.

Due to the many projects china has invested in, Kenya has become the largest beneficiary of Chinese aid.

Kenyan-Chinese trade stood at around $1.3 billion in 2009 with Kenyan exports to China almost negligible.

With few natural resources to attract China’s energy industry, Kenya is nevertheless considered an important access market and a regional cornerstone. The east African country has acquired new strategic significance for China through its proximity to the future state of Southern Sudan.

 
 

The rise of the middleclass

21 Jul

Kenya’s middle class has recently grown by about 10%, making it home for one of the largest middle class populations in sub-Saharan Africa. It has become a booming economic center complete with multinational businesses, towering office buildings and a growing middle class.

The rise of the middle class citizens which currently stands at 44.95%, places the country well above the average for the whole of Africa.

So who is the middle class?

The middle class is basically defined largely in terms of higher income relative to the average. That is usually individuals with an annual income “exceeding USD3.900 in purchasing power parity terms”

Other factors that are important in defining the middle class include other variables such as education, professions, aspirations and lifestyle.

So in a nutshell,economic growth is the main factor that has determined the rise of the middle class, ultimately leading to a boom in other industries such as the property and tourism.

 
 

Invest in Property

20 Jul

The property market in Kenya has changed drastically over the last few years; the middleclass has begun to appreciate the benefits of investing in property. So if you are wondering what to invest when sending money to Kenya, maybe you should start looking into the property market.

Property provides a solid and secure investment option, and with the demand for housing steadily rising it only makes sense for anyone who is serious about investing to consider buying property as an investment option.

For the individual, owning a home means you are converting what was previously an expense in the form of rent into equity. In addition to being a good investment, owning a home provides unique income tax benefits.

Housing Finance has eased the process of owning that first home through the introduction of a savings account known as 1st HOP. The account benefits Kenyans who are over 18 years and who hope to buy their first home by depositing a maximum of Sh4000 per month (or Sh48, 000 per annum) up to a maximum of Sh3 million for a period not exceeding ten years – all of which is exempt from tax if used for the purpose of buying a home.

For those going into retirement it is important to retire debt-free. One of the best things that you can do is to enter retirement owning your property since for many people; mortgage or rent payment is the largest expense they have.

Finally Mortgage offers greater peace of mind as rent payments can be unpredictable and typically rise each year, but most mortgage payments do not change abruptly. A stable housing cost is especially important in times of inflation, when renters lose money and property owners make money.

 
 

The cost of sending money

15 Jul

Sending money to Kenya is a financial transaction and as with any financial transaction it is in your best interests to know in detail, upfront, what fees you will have to pay for what type service and what limits or conditions there are on the transaction. Here are some of the things you need to consider when sending money back to Kenya:

Fees

The fee to send money abroad can vary depending on:

  • How you decide to make the payment
  • what service provider you use
  • how much money you’re sending

Limits

Depending on the service provider and type of service you choose, there may be a minimum and maximum limit on the amount of money you can send or the amount of money the recipient can withdraw or collect. Some service providers will require additional supporting documents for you to send anything

Exchange Rate

When sending to Zimbabwe you have the option for your recipient to receive the money in Rands or US dollars. In order to determine the amount of local currency that your dollars represent, companies will use an exchange rate. It’s important to know what exchange rate you will get when sending the money.

Look at the officially published exchange rates in order to get an idea of the kind of range you should expect. You will get a more accurate picture of the exchange rate if you compare rates between service providers. Ask a handful of companies/stores specifically what the exchange rate is for sending the amount you want to send to your desired country and don’t forget to ask specifically for them to break down what the exchange rate is and what fees they charge for their services.

 
 

Brain drain or gain?

13 Jul

I think we have covered-very well, the beneficial impacts of migration and remittances on social welfare: let’s look at the social cost again.

There are many Kenyans who have migrated and settled in foreign countries in search of greener pastures and promising labour markets. Most of these international migrants where forced out of Kenya by: the lack of promising jobs, a declining economy, and harsh political conditions.

One of the problems with emigration of skilled capital is the social cost. In many developing countries, education is free and provided by the government. Therefore if an individual receives an education and then emigrates, the social benefits of his or her education are lost. Thus the benefits of investing education are lost when the skilled workers emigrate.

The benefits of course, are that professionals abroad play a crucial role in rebuilding the country from abroad by sending money to Kenya and moreover by forming networks to help Kenya’s development.

 
 

How Online Money Transfers Work

08 Jul

We are probably all singing the same tune these days when it comes to sending money to Kenya. It is easy, convenient and super fast! This is all thanks to the fact that we can now make send money to our loved ones halfway across the globe online and they can collect that money instantly.

Ever wondered how exactly online transfers work? Glad you asked!

Online money transfer is where the old-fashioned concept of wiring money converges with the modern technology of electronic funds transfer, or EFT. You probably use EFT all the time — it’s simply a completely electronic way of transferring money from one bank account to another bank account. Data is exchanged; paper money is not. Using a debit card at a store transfers money from your checking account into the store’s banking account. Direct deposit payroll moves money from your employer’s bank account into yours. Both of these transactions are examples of EFT, and so is online money transfer.

But online money transfer is distinctly different from EFT — this is not about a way to pay your bills over the Internet. Online money transfer is the modern-day equivalent of wiring money: You can send someone money instantaneously simply by transferring money (or the data that represents that money) from you to another person. Usually involving little more than contact information — such as a cell phone number or an e-mail address — for the sending and receiving parties tied to a bank account, online money transfer can be done for a small fee from a secure, Web-based service via any computer with Internet access. There’s no need to go to a “money wiring office”, telegraph station or even a bank.

So that’s the “how” part unravelled maybe we should start looking into the why…. next time!

 
 

The different ways you can send your money to Kenya

07 Jul

Whenever you send money to Kenya, you are most probably looking for convenience, speed and ease of service; reliability and probably more importantly, options. You want to evaluate each of the many options you have before you make any decisions. In this regard, new media technology has brought with it a wide array of constantly evolving options which you need to be aware of.

Whereas many years ago, banks were the only reliable method to carry out international money transfers, now there are many other cheaper and faster options available such as online providers, MTOs, prepaid cards and even by SMS. Below is a summary of money transfer providers, different options to transfer money and how they work

Money Transfer Operators (MTOs)

MTOs are companies that only offer money transfer services, usually through agents, and only send money between countries. They do not generally require you to open an account and are usually easy to find in high streets, where they can be located in various locations from post offices to hairdressers. You will need to fill in forms and provide identification to send your money. Some also offer online money transfer services and are also developing mobile phone transfers. For example – mukuru.com

High Street Banks/Building Societies

The majority of banks offer money transfer services, but in most cases you must either apply for or hold an account with the bank you wish to use. It is usually necessary for the person receiving the money to have a bank account also. Banks tend to be more expensive and take longer to transfer your money; however they do offer additional security and also opens the door for access additional financial products such as loans, mortgages and savings accounts.

Online money transfer services/internet money transfers

Money can be sent over the internet through secure online services, often for a very small fee, but you will need to have a bank account or credit card and access to the internet, or at least an e-mail address, to transfer the money; you will also have to register your details online. The person you are sending the money to may also need a bank account and access to the internet (or an e-mail address), but this is not always the case.

Foreign Exchange Providers (FX Brokers) – for transferring larger amounts of money

When transferring much larger amounts of money, for purchasing a property or starting up a business for example, or sending regular payments abroad, it may often be cheaper to use a reputable currency broker. In most cases, you will have to open an account with the company you intend to use and you will need to fund the account using a bank account or credit card. However, the benefits of using such companies’ means you can make specific arrangements for your individual needs such as fixed exchange rates for a set period.

Prepaid money cards

Prepaid cards have evolved and are now starting to become recognised as a convenient alternative to the traditional methods. A prepaid card operates in the same way as a credit card or debit card and tends to have many benefits. The cardholder would have to load funds onto the card before using it and can only spend what you have on the card. Prepaid cards are available in selected shops, or can be ordered through the companies online. Not oly are they useful for sending money overseas, they can also be used instead of travel money when travelling and for online purchases. They are also accepted at ATM’s globally (or wherever either Visa or Mastercard are accepted, depending on your type of card) for withdrawing funds.

New technology money transfers

There are more and more companies offering new ways to transfer your money and use new technologies for remitting money. For instance a debit card (such as VISA or Mastercard) is sent to the recipient that can then be topped up by the sender whenever necessary. Money can be withdrawn as and when it is needed through any ATM without the recipient needing a bank account. There is also a growing trend in using your mobile to send money by SMS, please check with your provider if this is possible.

 
 

The stock exchange

05 Jul

If you send money Kenya regularly, or are maybe considering the various investment options are available for you in Kenya, maybe you should start considering investing on the Nairobi stock exchange.

Established in 1954, the Nairobi stock exchange is somewhat speculative and still very small. It is the fourth largest in Sub-Saharan, with just over 50 countries registered in 2010.

The products traded at the NSE are Shares and Bonds. Shares and Bonds are money or financial products. Another name for Shares is Equities, while Bonds are also known as Debt Instruments. Products traded at the NSE are in one name called Securities.

At the moment, there are over 50 different types of shares and over 60 of bonds at the Nigerian Stock Exchange.

What is the importance of this market to the economy?

For an economy to grow, money needs to shift from les to more productive activities. In other words, idle money and savings should be invested in productive activity for the economy to grow. The Stock Exchange makes this possible by:

  • Bringing the borrowers and lenders of money together at a low cost, thus enabling idle money and savings to become productive.  We therefore encourage savings and investments.
  • Educating the public about the higher profits in shares and bonds.
  • Facilitating good management of companies by asking them to give periodic reports of their performance.
  • Providing financial solutions to common problems.
  • Through shares and bonds; helping organizations raise money to expand their business activities, make a profit, create employment and generally help the economy to grow.