Forex Trading in Kenya: A booming industry and its regulatory landscape

21 September 2023

• The CMA has been recognised as the most cutting-edge capital markets regulator in Africa for 2019.

• Kenya has tightened its oversight of domestic forex operations in recent years.

Kenya is one of Africa's most efficient economies, with the third largest economy in Sub-Saharan Africa behind Nigeria and South Africa. Kenya is the economic, financial, and technological centre of East Africa.

Several international corporations have set up regional offices in Kenya, betting on the country's young and tech-savvy populace to drive economic growth. Due to the modest initial investment needed, foreign exchange trading in Kenya is becoming increasingly popular.

In a positive development for retail traders, Kenya has tightened its oversight of domestic forex operations in recent years.

Mobile forex trading is rapidly gaining popularity in Kenya. This trend has picked up speed since the introduction of M-Pesa, which has allowed millions of hitherto unbanked Kenyans to join the official banking system.

The Capital Markets Authority (CMA) and the Central Bank of Kenya are prepared to provide a trustworthy environment despite the prevalence of financial pyramid schemes and other frauds in Kenya, as is the case in most frontier markets. It solidifies Kenya's position as a dynamic, expanding market.

The regulatory framework of Forex trading in Kenya

The Central Bank of Kenya can pass regulations for the Capital Markets Authority (CMA) to follow, however the CMA is primarily responsible for regulating forex trading in Kenya.

Foreign brokers are now required to apply for a licence, verify minimum capital requirements, and file quarterly and annual reports with the CMA as part of the CMA's efforts to strengthen regulation. This is more proof of the growth of the foreign exchange market in Kenya.

The CMA has regulated Kenya's foreign exchange traders since 1989. It grants permission to work as either a "Dealing" or "Non-Dealing" foreign exchange broker, as well as a "Money Manager."

The advantages of Forex trading in Kenya

The sheer size and liquidity of the world market are two of the biggest draws to forex trading in Kenya. Foreign exchange, or forex, is a global market where currency pairs can be bought and sold around the clock by traders from across the world.

The vastness of the forex market is responsible for many of its advantages, such as its availability, liquidity, uncertainty, advanced trading tools, and extended trading hours.

Low investment requirement

Brokers today offer very low minimum deposits and very high leverage, making it possible to enter the foreign exchange market with as little as KSE 500. It is recommended that novice traders start with a minimum of $1000 and never risk more than 5% of their capital on any single deal.

Beginner-friendly conditions

The convenience of being able to trade currency from anywhere is a major advantage. Its appeal among inexperienced traders can be attributed to the low barrier to entry and low required investment.

Low transaction costs

You can enter the foreign exchange market with relatively little money, and once you're in, you'll enjoy minimal transaction costs. Spread, measured in basis points (pips), is the portion of the cost of trading a currency pair that goes to the broker.

Also read: Five best cent account Forex Brokers in Kenya