Challenges of Implementing Foreign Direct Investments (Fdi) at United Bank for Africa (Uba) Kenya
Abstract
Internationalization is referred to as the process of engaging in productions of goods and services
beyond national frontiers. Organizations may engage in such ventures either incrementally starting
with low commitment modes such as export, licensing and joint ventures then increase gradually to
the high commitment modes of foreign direct investments. This study was set to establish the
challenges of implementing foreign direct investment at United Bank for Africa Kenya. United Bank
for Africa (UBA) Kenya business strategy has been wholly owned subsidiary as the only entry mode
without engaging in prior low commitments such as exporting and licensing and increase to higher
commitment modes such as foreign direct investments. The objective of the study was to
determine the challenges UBA Kenya has faced in implementing foreign direct investment as an
entry mode as well as how it has responded to the challenges it has faced. The theories of
international business such as eclectic paradigm theory, transaction cost theory and OLI theory has
been used by many to explain the existence of FDI. This study adopted a case study approach to
determine if the theories can explain UBA Kenya’s preference of wholly owned subsidiaries as the
entry mode choice in all its foreign operations. The researcher used both primary data collected
with an aid of an interview guide and secondary data was collected through review of contents of
various relevant publications and reports at the bank. This data was later analyzed through content
analysis and presented in form of narrative. The findings from the study suggest that the
organization has encountered challenges in implementing foreign direct investment that include;
lack of acceptance in the Kenyan market, long turnaround time in loan approvals, also the bank
adopted operational policies of the parent company which are not in tandem with the Kenyan
banking industry, the Central Bank of Nigeria directive restricting repatriation of funds to non
performing subsidiaries in host countries. The study further found that the organization has at the
same time come up with ways of countering the challenges it has had in implementing the foreign
direct investment. United Bank for Africa has formulated strategies to aid in addressing the
challenges it has faced. The bank is carrying out a lot of advertising and awareness to dispel the
notion that United Bank for Africa Kenya is a Nigerian Bank. The bank has changed to a polycentric
policy whereby it has recruited Kenyans to the Head of Functions and currently has only two
positions being filled by expatriates to give the bank a Kenyan face. The bank has created policies
that are applicable to Kenya and has had them approved by the group board. The bank is
determined to ensure it changes the way people bank in Kenya by introducing innovative products
and services to the market. The study recommends that organisations should do a comprehensive
research before investing in a new market. Companies should research on the products being
offered by competitors and assess whether they are able to offer these products so as to be able to
compete. It also recommends that the policy makers should put in place strict rules and regulations
to guide foreign direct investment in Kenya. This is to ensure that subsidiaries formed within Kenya
are sufficiently independent from their parent companies to be able to make rational decisions
based on the market in which they are operating.
Citation
Master of Business AdministrationPublisher
University of Nairobi School of Business