Financial arrangements for imports and/or exports are normally more complex that those for domestic trade. Most of the payments are upfront and therefore traders need to determine the funds traders require and make adequate arrangements for sourcing these funds. Traders will make payments and/or receive proceeds in foreign currency. International banks will be involved. The exchange rates may fluctuate and, in the process, traders may receive less proceeds than traders expected or be required to pay more than originally planned. Here are some tips on financing imports in Kenya:
- …On Preparing for Import Payments
Import businesses require substantial funding to meet the purchase price of the goods, freight charges, insurance, duties and taxes. If for some reason traders are unable to raise funds by traders own sources, traders can use borrowed funds. Both short-term and long term funding can be obtained from the several Kenyan sources.
- …On Selecting the Banks Sources
The criteria for selecting the financing mode and institution could include:
- Cost of funds
- Flexibility of the mode
- Proximity of the bank
- Capacity to fund your requirements
- The period of credit
- …On Ensuring That Traders Have a Bank Account
Traders will need to use a bank account to make payments. Open a bank account with one of the reputable banks. It is advisable to use a large bank because it will have a worldwide network and is likely to have better experience. It is also likely to be less costly. If traders import regularly from a particular country, it may be advisable to maintain a foreign currency bank account.
- …On Ensuring Adequate Funds
Payment for imports is likely to be required upfront. Traders need to determine the total cash outlay traders require for each import transaction. The cost components are:
- Purchase price
- Freight
- Insurance
- Customs duty and taxes
- Port charges
- Local transport
- Clearing agent fee
- Bank charges
- …On Trade Policy
It is important that traders understand the country’s trade policy. This information will assist traders to align import and export plans and/or operations with the opportunities that are created by the trade policy. Trade policies will normally spell out areas of emphasis and what the Kenyan government is doing to promote trade. Issues like trade incentives, market access, financing of trade and trade agreements with other countries will be addressed.
Kenya is the natural entry point to the Africa region, a resource-rich continent. The economy of Africa consists of the trade, industry, agriculture, and human resources of the continent. As of 2012, approximately 1.07 billion people were living in 54 different countries in Africa. One of Africa’s exporting countries is Kenya. As Kenya seeks to regain its position as an economic giant in Eastern and Southern Africa, Kenyan Government has pointed out a need to catch up globally in terms of Kenya’s competitiveness in international trade. Kenya may post a lucrative import industry but traders need to be equipped with knowledge on trade policy, import payments, and bank information to obtain and maintain secure financial arrangements.