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Archive for September, 2011

Kenya’s vulnerabilities

29 Sep

Of late we mostly hear good news about the Kenyan economy. With the macroeconomic performance of the economy having improved significantly in the last year, it is not difficult to figure out why the country has become a place for opportunity not only for major investors but also for the ordinary person whose goal, when leaving the country for the Diaspora was just to merely support their families by sending money to pay bills and cover daily expenses.  It has become an opportunity for the working class community in the Diaspora to invest in property and small businesses, some of which have grown significantly riding on the wave of this fast expanding economy.

If we are to be objective however, there are challenges. Challenges that should not be ignored lest this promising outlook be just but a dream we never see coming to fruition.

First, Kenya will need to reduce its high reliance on agricultural outputs to limit its vulnerability to climate hazards by diversifying the economy. Second, Kenya may be vulnerable to another political shock as it faces 2012 elections.

I think it helps to be aware of any potential pitfalls in any economy, not simply because we have emotional ties to the country and it is home to so many, but  also because when we send money to Kenya on a regularly for whatever reason, we are making an investment which needs to be guarded, protected and nourished.  So this is not a bash at the economy, just constructive criticism for a country we all love so dearly.

 
 

How to determine your financial future

26 Sep

Usually when you send money to Kenya you have a list of financial goals that you need to achieve. These goals probably include paying the rent, putting food on the table, keeping the lights turned on, and other very basic things that most people usually take for granted. Investment very understandably is at the very bottom of that list.

Not that you are not concerned about the future, but you are just so caught up in the now, trying to survive-in the moment, that you don’t have the opportunity nor resources to worry about it.

So with the first world recovering from the economic crunch and the Kenyan economy making small steps towards recovery, it is reasonable to say that no one actually has any money left to invest after paying the very basic bills that they have to pay in the Diaspora and back home in Kenya.

The question though, is; is it a wise decision to wait until you have enough money to actually make a reasonable investment?  Is it ok for you to keep putting this off until you have taken all your kids through college?

I guess the answer to that is a bit obvious.

Although we might not want to hear this, investment is so crucial that you actually cannot afford not to think about it, especially considering your current situation. We all know that we will always have wants and needs, and the important thing is not doing away with our immediate needs but rather, to realise that our future should be a top priority, it is not a want but a need.

The big question really, is not how much you invest but if you are investing at all! It is never too early to invest, so just be sure to look into the investment options that will best work for you given your financial goals and abilities.

 
 

What is an EFT?

20 Sep

The process of sending money to Kenya has become very convenient and faster thanks to new online advancements that transformed the world payments. It is however shocking how many people are ignorant of what an EFT actually is, so I thought it would be suitable to demystify what should be common knowledge to everyone at this stage.

An electronic funds transfer(EFT) is a process whereby money is transferred from one place to another electronically. Computers are used to process payments in a variety of ways. The EFT procedure is a quick and efficient way to transfer money from one account to another.

EFT is used millions of times a day the world over. If you are earning a salary, your cash may be placed into your bank account by EFT. You can then withdraw money from an automated teller or use your debit card to pay for goods and services. Using your debit card in a store to pay for goods is another example of EFT.

EFT has simplified the money transferring process. Once money has been paid into an account using this procedure, it should be available immediately. Some banks and processes may hold up the transfer of funds in order to verify and process the transfer.

EFT has made buying and selling on the Internet a much simpler way to conduct business. Many Internet sites allow you to pay for goods by electronic fund transfer. This speeds up the transaction process, as money can be passed between accounts in real time. You can see when money has been deposited into your account within seconds of the other person sending it.

 
 

The Kenyan Stock Exchange

16 Sep

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.
 
 

An overview of the Kenyan economy

14 Sep

Kenya has experienced considerable economic growth in the past few years. Some of the key advantages that make the country such a lucrative investment option are that it has: a reasonably well-educated labour force, a vital port that serves as an entry point for goods destined for countries in the East African and Central Africa interior, abundant wildlife and kilometres of attractive coastline and above all, a government that is committed to implementing business reforms.

Kenya’s agricultural development still remains the most important contributor to GDP with horticultural industry of mainly high quality cut flowers being among the leading export products. Kenya’s transport and communications infrastructure are of a middling quality, although recent developments should bring about more vigorous competition and better services in the medium and long term. Kenya is part of the East African Community (EAC), of which Tanzania, Uganda, Rwanda and Burundi are the other members. And as we saw yesterday it has the biggest and most competitive economy in East Africa.

 
 

Kenya ranked seventh

12 Sep

Although some African countries have made progress economically, the region still lags behind the rest of the world.

It is therefore worth noting that some countries are making strides and putting the African continent on the map with respect to national competitiveness.

According to the latest Global Competitiveness Index for 2011-2012, published by the World Economic Forum, Kenya has been ranked the seventh most competitive country in Sub-Saharan Africa; but what does it mean for a country to be competitive? How is the competitiveness of an economy measured anyway?

The World Economic Forum defines competitiveness as “the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be earned by an economy. The productivity level also determines the rates of return obtained by investments in an economy, which in turn are the fundamental drivers of its growth rates. In other words, a more competitive economy is one that is likely to grow faster over time.”

As the economy continues to grow, this is likely to reinforce the nations’ position as East Africa’s economic, commercial, and logistical hub.

I just thought it would be comforting to know that as you continue to send money to Kenya for whatever reason, you are making an investment into a competitive economy and you are definitely guaranteed to see competitive returns on your investment.

 
 

Kenyan remittances continue to increase

06 Sep

Being the beginning of another month, I thought it necessary to look at the recent remittance trends.

According to the Central Bank, remittances to Kenya jumped by 44 percent in July from the same month a year ago to $72.8 million, up from $71.9 million in June, the central bank said on Wednesday.

Remittances are the fourth-largest source of foreign exchange in east Africa’s biggest economy after revenue from tea, horticulture and tourism.

The July figure topped that of June, which was already a five-year high for monthly remittances.

Kenyans sent home a total of $479.3 million in the first seven months of the year, compared with $350.9 million in the same period in 2010, the bank said in a statement.

Last year they sent home a record $641.9 million, a 5 percent increase from the previous year.

According to the Central bank of Kenya, the increase in remittances in 2011 continued to reflect economic recovery in source markets, and a favourable domestic economic environment

The bank said that, like in the previous month, the main source of money was from North America and Europe.

Typically, Kenyans living abroad send money home to help their families and for investment in various sectors, including real estate.

 
 

East Africa’s Investment choice

01 Sep

The property market in Kenya has seen massive opportunity, mainly along the Indian Ocean coastline within the many game reserves Kenya is so famous for.

In addition to being the business hub of East Africa, Kenya is blessed with natural beauty, incredible scenery and abundance of rare and amazing wildlife. Its tourism sector has continued to flourish and the country even attracted property investment into the game reserves in the form of commercial lodges for tourism and also along the Indian Ocean coastal region in the form of a few second home and retirement home developments as well as some holiday resorts and commercial ventures as well.

The increasing number of visitors to Kenya has inevitably boosted the more conservative business confidence in the country and gradually the economic fortunes of Kenya are beginning to see a sustained positive shift.

So weather you are making a long term residential or commercial property investment, Kenya is definitely a significant choice thanks to the growing tourism sector and the solid growth in their underlying investment technology.