Businesses & Financial News

FXPesa eyes regional expansion as markets contend with inflation


FXPesa began Kenyan operations nearly five years ago, becoming the first licensed broker to offer Forex and CFD products for the retail market in East Africa.

Today, the trading platform – powered by EGM Securities Limited which is part of a global group – Equiti Group, is ranked the sector’s market leader by far despite more retail and professional traders inflowing the market.

Its agents, without disclosing revenue numbers, are now ascribing the firm’s sustained steady growth to their ideal model in adopting local conditions.

“In Africa, every market works differently and Kenya is a very lucrative market for so many reasons. The legislative structure for instance works very well. Other markets operate differently.

What is interesting is that, when we started four years ago, there was no chance we were going to hire experienced individuals in forex trading. But this country has a good education background which made it easier to train the workforce we needed for this trade,” opens up Moonika Jurgenfeldt, Equiti Group’s Chief Revenue Officer for Africa.

FX trading growth patterns

In a recent interview, Jurgenfeldt discloses that Forex Trading in Kenya largely grew during the Coronavirus pandemic – a period that coincided with the platform’s local launch in May 2019.

Forex trading is basically the process of speculating on currency prices to potentially make a profit. Currencies are traded in pairs, so by exchanging one currency for another, a trader is speculating on whether one currency will rise or fall in value against the other.

Growth rates, not just locally, were more pronounced in developing countries, with traders’ accounts from Africa, Eastern Europe, and Southeast Asia making up about 60 percent of new accounts.

In 2020 alone, FX trading witnessed an increase of 300 percent growth globally during the pandemic.

As a result, the steep increases in trading activity and account numbers placed pressure on forex brokers. Employees, some of whom continue to work remotely and liquidity demands, meant that smaller forex brokers were not a safe choice for traders.

The circumstances leading up to this rise which is still noticeable even now amid global inflationary pressures, have been unprecedented, according to Jurgenfeldt.

In fact, industry data shows that more than 100,000 traders in Kenya are now actively trading in the Forex market and the number is growing.

The buoyant Jurgenfeldt, who has over 15 years of experience in the game, working across different markets, however, believes that the figure could be bigger owing to the growing number of professionals taking interest in online forex trading.

“We are seeing young people from the age of 25 years and above taking interest in FX trading since we announced the program,” she reveals.

Financial literacy program

About two years ago, the company unveiled a financial literacy program whose aim is to empower youth and women to consider online forex trading as an alternative investment tool to supplement their daily hustles.

“We kicked off the program about two years ago via online sessions with several local universities, a two-hour session to open up their eyes on FX trading which includes the pros and cons about the trade.

Through this, we got encouraging feedback which motivated us to upscale it across the country initially targeting professionals in different fields, but we have since segmented it to extend lessons tailored for women,” she reveals.

To date, Jurgenfeldt tells me that over 130,000 individuals have benefitted from the program with classes conducted both online and offline, revealing that more partnerships are in the pipeline to grow that figure.

Further, Moonika believes that the urgency to improve financial literacy levels for wealth empowerment among Kenyans, specifically women, was the sole motivation factor to pioneer financial literacy programs – a first in the market by such a player.

“When it comes to financial literacy, we are not pushing our brand, but the idea is to promote the need to invest in these markets beyond the conventional investments such as land which is quite identical with most young professionals across the African market,” she narrates.

Adding that, the recently launched Eastleigh training center by FX Pesa, will go a long way in enabling women with skills on financial management matters which they can then implement in running their own business ventures and also use to invest and save for the future. The center offers women’s only classes.

Trends show that women in the developing nations, such as Kenya, have a 20 percent less likelihood of owning a bank account in a formal financial institution.

Financial illiteracy, among such individuals can result in poor saving, poor spending, excessive credit card use, and bad investment decisions. To some extent, the stress of financial insecurity in some families can lead to divorce, suicide, domestic violence and other crimes.

Such reasons, according to Moonika, have been the greatest contributor of poverty in most African households, calling on the government and relevant bodies to champion the call to offer financial literacy programs in schools and have such plans entrenched in schools curriculum.

Expansion plans

Following the firm’s impressive debut into the Kenyan market, Jurgenfeldt believes that this may be the best time to expand the popular trading platform in emerging regional markets that could offer additional revenue streams amid growing interest in FX trading.

“We are speaking internally a lot about it. We are seeing the potential for growth in quite a number of markets. But for sure looking at the end of this year and next year, we are keenly doing market research for potential entries in those markets,” reveals Jurgenfeldt.

Currency trading has become a lucrative business across the continent for a number of reasons, some practical and some aspirational. For starters, there’s a low barrier to entry.

In addition to a little capital, the only equipment needed are cheap smartphones, Chinese-made solar panels, and secondhand laptops, which traders use to access third-party trading platforms and other low-cost retail brokerages.

Ease of access, however, doesn’t guarantee success. Forex trading can be a high-risk, high-reward endeavor, and Jurgenfeldt advises prudence while trading.

“We make our profits from exploiting volatility,” she explains. “It doesn’t matter where I invest and while trading one must trade when at least two markets are open because that is when there is the most volatility. You have to be on the lookout for these opportunities, for volatility basically,” she offers.

High inflation fuels FX trading

The inflationary fires have been well and truly stoked by the twin supply-side shocks of coronavirus and Russia’s invasion of Ukraine, coupled with increased demand driven by counter-pandemic government stimulus packages over the last couple of years not just globally but also in Kenya.

It is hard to miss inflation in recent economic numbers, and maybe even more so, the fear that the inflationary cycle is going to hang around a lot longer than the CBK’s monetary policy and investors would like.

You have seen it at the pump, in food prices and your favorite supermarket, or in the housing and real estate market, and for those who follow stocks, you definitely hear about it in the lips of millionaire investor talking points.

In March 2022, the global inflation rate for the consumer price index reached 9.22 percent, compared with 7.47 percent in February 2022. Year-on-year inflation in the OECD as measured by the Consumer Price Index (CPI) rose to 9.6 percent in May this year in what has been blamed on the Russian invasion of Ukraine in February.

Closer home, the annual inflation rate in Kenya increased to 8.3 percent in July of 2022, the highest reading since June of 2017, from 7.9 percent in June.

For seasoned forex traders, anyone just getting started, and of course, for any macroeconomic nerds out there, inflation is an essential concept when it comes to online trading.

Exchange rates depend on the desirability of one currency over another and even the perception of desirability and that depends on various economic factors, including trade balance and economic growth among other factors.

How FX Trading works

So, if you want to make good money through forex trading in Kenya, spend the day reading the market, and take your position between 6 and 7 PM when the London and New York sessions overlap. At this time the market is most liquid, giving you an opportunity to make good money.

Firms licensed as non-dealing online foreign exchange brokers act as a link between the online foreign exchange market and a client in return for a commission or mark-up in spreads.

The licensees do not engage in market-making activities (buying and selling of foreign currencies).

They will provide their clients with access to trading platforms, enabling them to trade from anywhere and at any time using their electronic devices. Online foreign exchange trading platforms give access to global markets and an opportunity for clients to educate themselves on the global financial markets.

Non- dealing Online Forex brokers do not offer client advice or trade on behalf of their clients.

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