The Kenya Bankers Association (KBA) on Wednesday, August 2, revealed that Kenyan traders are increasingly using the Chinese Yuan instead of the Dollar to settle payments when making purchases.
Habil Olaka, CEO of KBA in an interview with Xinhua revealed that one of the main reasons for the shift was because of rising Sino-Kenyan trade ties.
With many Chinese projects in the country, KBA noted that Yuan was emerging as an alternative currency to the US dollar in settling financial transactions involving trade between Kenya and China.
“What tends to happen between two countries trading, is that they use a currency that is readily available in their countries,” Olaka explained.
Kenyan wholesalers and retailers also get their merchandise from the second-largest economy in the world, making the Yuan a favourable settlement currency.
The KBA CEO made the revelations when he was leading the launch of the 2022 Kenyan Banking Sector Total Tax Contribution study by KBA.
As the country continues to grapple with dollar scarcity, Olaka revealed that most local commercial banks had a yuan trading facility that made the Chinese currency readily available.
With trade between Beijing and Nairobi continuing to grow, KBA explained that many traders were finding the yuan as the appropriate currency for trade.
In the past, many traders were using the dollar but using the Yuan, significantly reduces transaction costs since it eliminates the need for multiple conversion of currencies.
To emphasise the rising popularity of the Chinese yuan, KBA noted that the majority of banks in Kenya had opened Chinese desks.
“This is in order to serve the growing Chinese business community in the East African country,” Olaka was quoted by Xinhua.
The popularity of the Chinese yuan started gaining pace in 2016, when former President Uhuru Kenyatta’s administration revealed it would start borrowing directly in the Chinese Yuan and other foreign currencies to reduce reliance on the dollar.
At the time, the Treasury revealed that loans from China were received in yuan, the Ministry then had to wire the money through a bank that sells it in dollars and does a similar conversion when making payments, incurring currency losses.
The yuan is projected to continue gaining popularity over the dollar as China continues to be the country’s biggest trading partner.
According to research done by Carnegie in 2022, China accounts for 16 per cent of Kenya’s total trade volume far ahead of the European Union (14 per cent), and the United States (4.5 per cent).
“In 2021, China was Kenya’s main import partner. Imports from China amounted to roughly Ksh441.4 billion,” Statista further revealed how China was becoming the country of choice for Kenyan traders.
Traders transacting with China usually import electrical machinery, spare parts, railway and trainway locomotives, iron and steel, and vehicles.
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Source-https://www.kenyans.co.ke/
Kenyan Traders Ditching US Dollar For Chinese Currency
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