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Archive for October, 2011

A look at the Shilling

26 Oct

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 US dollar for a while owing partly to the import of more than 23000 tonnes of maize at a cost of more than $100 million.

The shilling has depreciated 20 percent this year and acooding to Bloomberg Business week, this makes it the world’s worst performer against the dollar. With infation accelerating steadily over the last 11 months maybe it is best for government to get more vigilant and ready to take additional measures to stem any inflationary pressures and instability in the foreign exchange market.

 
 

The Nairobi stock exchange

19 Oct

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.
 
 

Rise of the middle class

14 Oct

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 centre 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.

 
 

The crucial link

06 Oct

Connectivity is very crucial when sending money to Kenya. It could make the difference between your recipients receiving their money instantly, within an hour, on the same day and receiving the money just moments after it is needed.

So it paramount for any remitter to consider how good or bad internet and mobile phone connection is wherever they intend to send.

In this regard, the development of Information Technology in Kenya has been relatively slow.  For instance, the connectivity problems are as a result of unusual socio-economic conditions in the country. Other reasons include poor economy, high foreign debt, alarming population growth, declining resources and social infrastructure, and degradation of the environment. These problems have direct impact on the implementation of the network and the kind of public policies that promote connectivity.