Business environments of International Financial Centres: Lessons for Nairobi
Kenya lacks natural resources like minerals and oil. As a result, the population continues to suffer from unemployment and in general low GDP per capita. To remedy this situation, this study proposes creation of financial resources by developing Nairobi to an international financial centre (lFC) through attracting foreign financial assets to trade in the Nairobi Securities Exchange. Ordinary least squares method is used to show the relationship between IFCs and the business environment of a city. To quantify the dependent variable (stature of Nairobi as an IFC), market capitalisation is used as a proxy whereas to quantify the independent -variables (business environment of Nairobi), several factors were used. These factors include level of business disclosure required, availability of credit information, cost of dismissing employees to the employer, use of Information and Communication Technology (lCT) - number of cell phone users was used as an indicator, political stability, strength of the legal system, tax burden on businesses, level of urbanisation and adult literacy levels. The results indicate that most of these business environment proxies are statistically significant determinants of market capitalisation. The results also show that Nairobi's business environment is underdeveloped. The study proposes that to attract financial resources to trade in: the Nairobi Securities Exchange, the policy makers need to develop Nairobi's business environment by improving on the factors identified.