The Influence Of Foreign Exchange Availability On The Efficiency In Settling International Business At Commercial Banks In Kenya

Abstract

Kenya involves much in international business with china, India, Japan and other countries. Kenya’s International business sector is the main business area which contributes more than 15% of the country’s economy. This sector is a key market’s for many currencies that differs from importing and exporting country. Kenya and this brings in the issue of foreign exchange availability due to changes in exchange rate and inflation. The country operates within a market of unstable exchange rates which is affected and set by the demand waves and supply forces of the Kenyan shillings. The local currency is always week against the major currencies every trading period since they are used in settling the international business in Kenya. The study aimed to determine the influence of foreign exchange availability on settle ling of international business. The research used primary and secondary data from the commercial banks and the CBK. Banks FOREX data was analyzed together with the Exchange rates (KshsVs USD) obtained from Central Bureau of Statistics for the period January 2011 to December 2015. The study adopted consisted inflation index, GDP and FDIs which drives the international business and trading. Multiple regression was adopted to investigate the relationship between FOREX availability and foreign exchange rates, inflation, FDIs and GDP for the period 2011-2015. The findings of this study established that there was significant relationship between exchange rate and FOREX availability in Kenya. The Pearson correlation was 0.775. From the study, inflation of the local currency affected FOREX availability in most of the financial outlets which facilitate the money transfers to the business. The research recommends for the regulator to boost FOREX in order to promote and maintain sound, profitable and timely International business with Kenya. The central and county governments should create a use friendly investment environment to attract international business. However, CBK should maintain monetary regulation, policies which will increase the rate of import and export diversification. However, the increase of FOREX supply in the international market which will reduce the operational cost and maximize of profits. With regard to further research, studies can be on other factors affecting international business in Kenya within a longer period of time.