In Africa, Kenya is among the fastest developing countries in many industries. Just like many other African countries, the online Forex market has grown mainly due to a lack of opportunities for the younger generation. It has now become an actual source of income for many who have seen the potential in this industry and with good reason – it is indeed very profitable. You too can benefit from this industry, but you will have to be really careful about the broker you choose. Many companies will advertise to be the best Kenyan FX brokers while they are actually just scammers. This post will help you understand the many intricacies involved in selecting a Forex broker in Kenya so that you don’t fall into any traps.
In the past, the Foreign exchange was confined to physical Forex bureaus where one could switch one currency for another. Yet as the financial regulations kept changing, individuals were pushed toward the online Forex trading industry. As of 2015, there were just 86 licensed Forex brokers operating in Kenya, which was a fraction of those that were previously. The reduction in Forex bureaus was due to stricter regulations passed. For instance, the core capital required rose to $60,000 from $30,000 while the minimum balance required also doubled from $2,000 to $4,000. This gap provided entry to the best Kenyan FX broker, and the rest has been history.
Today, there are not only individuals participating, but the online Forex industry has also created other avenues in the form of Forex training colleges, forums and conferences. Obviously, all these have to be paid for, but many of them are sponsored by the brokers themselves. As a result, they will try to push you toward a particular top Kenyan FX broker when in fact they aren’t. If you truly want to find the best broker to work with, then keep on reading.
We have compiled a list of some of the best brokers based on Kenyan Forex broker reviews on social media and online forums. In the next section, we shall see the regulations that guide the Forex brokers operating in Kenya, then you will come to understand the reason for our selection.
FCA, CySEC, IFSC
These are just some of the most trusted Forex brokers in Kenya that you should consider if you want to start your trading career. Apart from being trustworthy, other aspects of their services ensure that every trader receives the best services. These range from tight spreads, low commission, fast execution and money transfer into and out of your account and an excellent support team.
The rules and regulations governing online Forex trading in Kenya are encompassed in the Capital Markets Act. It is under this same legislation that the Ministry of Finance formed the Capital Markets Authority (CMA) back in 1989. The role of the CMA is to license and supervise all financial institutions operating in Kenya including the Forex brokers. Only CMA regulated Forex brokers are allowed to solicit Kenyan residents and sign them up as clients.
Nevertheless, there are some offshore brokers who continue to provide their services even without a license from the CMA. Typically, it is not advisable to trade with an offshore broker who does not have a license from the local financial regulator. Unfortunately, there is still not a single CMA regulated Forex broker, leaving traders to work with offshore brokers. The best of these offshore brokers have been listed above in the previous section, as these companies have had a good reputation. The problem is that the Capital Markets Act was passed back in 1989 and hasn’t changed much since then. Considering that the online retail Forex market only started to balloon over the past decade, it is understandable why the legislation does not cover this industry.
Recently, though, the CMA published an amendment to the Capital Markets Act in light of the fact that Kenyan residents were still participating in the online Forex market through unlicensed brokers. In an interview with the CMA’s Chief Executive Paul Muthaura, he stated that there were over 50,000 Kenyans participating in the online retail Forex market through these unlicensed brokers. Due to this, there was a real need for targeted legislation lest people start falling into Kenya Forex scams.
In the new legislation, all online Forex brokers who seek to solicit Kenyan residents have to be licensed by the CMA. Among the regulations were that they reserve Ksh. 50 million minimum capital at all times. In addition to this, they must also maintain 5% of client liabilities in a reserve account if these liabilities exceed Ksh.50 million. Furthermore, at least Ksh.40 million or 80% of the capital, whichever is higher, should be in liquid form at all times. Finally, foreign companies seeking to be Kenyan regulated Forex brokers must keep Ksh. 40 million of their capital invested in Kenyan financial instruments.
Compared to the regulations in other countries like the US, these don’t seem to be very tough conditions. Regardless, it would seem that the brokers aren’t much interested in the Kenyan market since none have set up base in the country. Compared to other African countries like Nigeria and South Africa, it would seem that there aren’t any companies eager to be a CMA regulated FX broker.
Apart from targeting the Forex companies, even the retail traders are supposed to only work with companies on the CMA regulated Forex brokers list. The new regulations also require that traders fund their trading accounts through their broker’s ledger account. A reason for this is to circumvent the use of 3rd party payment service providers like Skrill, Neteller and, most often, Mpesa. These payment service providers allow individuals to fund their trading accounts even on unlicensed, offshore brokers without having to go through the banks. Presence of mobile payment services like Skrill has made this even simpler, leading to a difficulty in tracking capital flow into and out of the country.
With the ledger accounts, the Central Bank of Kenya (CBK) would be able to track individual traders’ transactions in order to properly control the money supply. Moreover, the Kenya Revenue Authority (KRA) would be able to tax traders based on their income from Forex trading. The largest Forex brokers in Kenya may have many clients from the country, and this will help the authorities with the tracking of money flow.
In spite of seeming a bit harsh, these rules and regulations are indeed going to improve trading conditions for Kenyan traders. First and foremost, it will help to curb fraudulent activities, which have been going on for a long time. Perhaps the biggest Forex scam in Kenya would be the one involving VIP Portal. The company was based in Limuru, but it lures investors from many other regions of the country such as Nakuru, Kisumu, Nyeri and Kisii. The company had promised that it would use the invested money to trade on behalf of the customers in the online Forex market and double their money.
By the time the swindle was discovered, more than 13,000 individuals had deposited more than Ksh. 1 billion between 2013 and 2014. All the money was lost since it had already been withdrawn and transferred to offshore accounts, leaving the investors stranded. While this may have been a huge scam for the headlines, many more of them continue to happen on a smaller scale. It just goes to show the importance of the CMA and why the top Kenyan Forex brokers have a CMA license.
Apart from trading the Forex market, the cryptocurrency market is also a very lucrative one. Trading these cryptocurrencies is even better and much easier to do through the
In a report issued by Citibank on the first week of January this year, Kenya is among the countries with the largest bitcoin holdings. In the report, these holdings stood at around Ksh. 163.3 billion ($1.58 billion) at the beginning of the year. Considering that Kenya’s GDP in 2016 was Ksh. 7.1 trillion ($69 billion), it would seem that bitcoin holdings were about 2.3% of the entire country’s GDP. Furthermore, this is about a half of the Standard gauge Railway’s budget that cost the country $3.2 billion – the biggest infrastructure investment ever. In the Citibank study, Russia holds the largest bitcoin holdings at 5% while Nigeria and New Zealand have 4%, which are the three largest bitcoin holding countries.
This goes to show just how cryptocurrency trading is popular in Kenya, with even the formation of cryptocurrency exchanges like BitPesa and even forums like Blockchain Association of Kenya. Apart from these centralized exchanges, there are also several peer-to-peer platforms like LocalBitcoins and Remitano that allow Kenyans to buy and sell bitcoin. Perhaps the widespread use of bitcoins and other cryptocurrencies has been spurred by the popularity of mobile money transfer like Mpesa and Airtel Money. Both of these have made cryptocurrency transactions very easy to accomplish and accessible to anyone.
Nevertheless, the Central Bank of Kenya (CBK) has explicitly stated that bitcoin is not a form of currency. Back in December 2015, just as cryptocurrencies were getting more popular, the CBK released a notice stating that bitcoin and other cryptocurrencies are not legal tenders. Nevertheless, the Ministry of Information, Communication, and Technology has acknowledged that there may be a benefit in the underlying technology, blockchain.
For Kenyans seeking to trade bitcoin and other cryptocurrencies, they can either use the various aforementioned avenues or go through one of the several Forex brokers offering cryptocurrency trading. Of course, given the CBK’s stance on cryptocurrencies, there are no CMA cryptocurrency brokers, but many popular Forex brokers can still offer adequate services.
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