Forex trading in Kenya has experienced rapid growth in recent years, making it the third-largest forex market in Africa after South Africa and Nigeria. The increasing number of retail traders is more or less pegged on easy access to the online platform, which shows the growth of Kenya on the continent.
A report published in 2024 shows that the retail forex market in Kenya grew by over 200 percent in only two years, a reflection of a swelling interest among Kenyan traders. The most traded pairs across the market include US dollars against Kenya shillings, Euros and British pounds, where the dollar continues to be the most desirable.
But even with such growth, the challenges remain, more so on access to education and resources. Most traders lack a deep understanding and knowledge of the risks regarding the forex market, which exposes them to some huge losses. However, with the gradual rise of online educational materials and tools, the market is still promising for further expansion.
Regulatory landscape and compliance
The framework of forex trading in Kenya has improved immensely over time. Key in the regulation is the Capital Markets Authority (CMA), which is responsible for licensing and overseeing forex brokers towards adherence to the law. The Central Bank of Kenya (CBK) also plays a major role in the enforcement of currency regulations.
These included the Capital Markets Online Foreign Exchange Trading Regulations, with which the agency sought to establish a legal e-framework protecting traders against fraud. In 2023, this gained further enhancement with the introduction of the Kenya Foreign Exchange Code to enhance transparency, stability, and integrity in the forex market.
By insisting on the licensing of brokers, these regulations only increase confidence in this market. In dealing with Kenya’s market in line with the global conditions, these measures have also helped reduce risks, some of which were closely linked to unregulated forex trading. However, the absence of credible regulation relating to offshore brokers still exposes the traders of Kenya to risk factors.
Growth of online forex trading platforms
The increase in the number of online forex trading platforms has been at the heart of the market expansion in Kenya. Most of these platforms are mobile-friendly, hence providing convenience to traders in accessing global market arenas. Among the popular ones are MetaTrader 4 and MetaTrader 5, which provide tools for technical analysis and automated trading.
Moreover, a handful of Kenyan-based brokers, including EGM Securities, have successfully established a local presence since receiving a CMA license. Competitive leverage – typically as high as 1:400 – and relatively requiring low capital outlays, have made them very attractive to retail traders. That easy entry has driven up the numbers of traders, a situation that also carries with it some risks if not properly managed.
This, in particular, has further been propelled by the dispersed development of mobile money, especially with M-Pesa. They can deposit money in forex accounts through mobile wallets, a process that further streamlines the transactions, making them even easier and more secure.
Impact of mobile money and digital payment systems
The processes of deposit and withdrawal by forex traders have to be fully revised with a complete dimension following M-Pesa, one of the pioneering mobile money systems in Kenya. In essence, everyone had access to digital payment integration. For instance, by the end of 2024, mobile money is expected to compose a significant proportion of retail forex transactions and, therefore, lower the bar for people who are already interested in starting to trade.
This integration has brought in a lot of liquidity and convenience into forex trading by reducing reliance on traditional banking channels and generally eliminating delays in transactions. The availability of platforms that can accept direct M-Pesa deposits into forex accounts has eased this process of trading for Kenyan traders.
While this has spurred growth, the ease of access has also given way to emerging problems. Most of the inexperienced traders, lured by easy access to mobile payments, lack professional training in risk management; hence, they could incur losses. However, regulators and brokers are stepping toward assisting in diminishing such risks.
Predictions for the future of forex trading in Kenya
The Kenyan forex market will continue growing in the future. With improved adoption of mobile and digital platforms, added to the improving regulatory environment, the country is well set to be a future leader in forex trading in Africa. According to analysts, increased numbers of traders continue to look to leverage forex, with increased internet penetration and improving digital infrastructure.
The demand for currency pairs involving the Kenyan shilling, such as the $/Ksh and the €/Ksh, will most likely be the prevailing trend. Additionally, the continued economic interlink of Kenya with other world economies will also maintain interest in global currency pairs of relevance to the Kenyan traders such as the €/$ and the £/$.
However, the future will also importantly depend on additional improvements in trader education, regulatory oversight and fraud protection. As mobile money expanded access to markets, it also increased the need for better financial literacy and risk management strategies.
Regulators will have to resolve the challenges emanating from unlicensed brokers operating from jurisdictions offshore, while brokers will have to further enhance their educative offerings in support of traders that are now inter alia, facing a market environment that is ever more volatile.
The forex market in Kenya depicts good prospects, with a high probability of expansion. In the future of the forex trading business in Kenya, further improvements arising out of advanced technology combined with sound regulatory mechanisms would be reasonable expectations.
Ultimately, the good prospects for the forex market in Kenya will be realised through prudent handling of the risks involved.
Source link : https://nation.africa/kenya/brand-book/future-of-forex-trading-in-kenya-4782862
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Publish date : 2024-10-06 11:11:12
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