Kenya’s capital, Nairobi, has already made a name for itself as a regional hub for trade, innovation and technology. Now plans are underway to take the city to the next level of becoming a global financial center.
Kenya’s launch of the Nairobi International Financial Center (NIFC) last week, making the capital a financial hub, shows the country’s openness as an economy and its confidence in its own ability to compete on the world stage. , said Mark Napier, CEO of FSD Africa. , a non-profit organization that promotes the development of the financial sector in sub-Saharan Africa
The center, which has been in existence since 2014, is intended to help direct international investment to Kenya and Africa as a whole, enabling businesses and investors to take advantage of trade and investment opportunities. It aims to raise more than $ 2 billion in investments by 2030.
While the NIFC is a tool for investment and job creation, it is also a brand image that shows Kenya is ready to embrace new technologies and is ready to be connected to the global economy, says Napier. âWhen you think about the talent that there is already in the financial markets in Kenya, you know these guys who work in those markets, they don’t want to be judged by reference to their regional peers. They want to be judged by reference to their global peers, âhe told Quartz.
An IFC facilitates international financial activity
An international financial center (CFI) is a place with sites and services that facilitate international activity in areas such as banking, asset management, insurance and financial markets. It operates within a regulatory framework that complies with international standards.
Nairobi joins Casablanca, Cape Town, Mauritius and Johannesburg as IFC on the continent. Rwanda, for its part, is seeking to transform its capital, Kigali, into an IFC. Examples of IFC outside of Africa are New York, London, Shanghai and Hong Kong.
“It’s a step beyond the internal market,” NIFC president Vincent Rague told Quartz. He adds that he can raise capital by attracting savings to the center and also using it to invest in viable projects.
Kenya is already a business and technology hub
Kenya, the third-largest economy in sub-Saharan Africa, is already a trade hub, with major global companies having their regional headquarters in the country’s capital. The country is ranked 61st in the World Bank’s 2019 Doing Business Index, which measures regulations on business activity in countries. His score of 70.31 is much better than the regional average of 51.61. Nairobi is also the world headquarters of the United Nations Environment Program. In addition, Nairobi is a major continental technological hub. Popularly known as âSilicon Savannah,â the city’s tech ecosystem is home to many innovation centers and hundreds of startups.
It’s a place where people really want to come and live.
The city is well positioned to become an IFC as it has proven itself to be able to serve as a headquarters and it is a good geographic location to reach most parts of Africa easily and conveniently, says Rague. Other reasons, he says, are that it has a large number of international schools that can provide education to many nationalities, and that it has law firms that have affiliations with law firms. international in case of need for dispute resolution.
African IFCs rank at the bottom of the global index
Most IFCs located in Africa rank in the bottom half of the latest Global Financial Centers Index, which compares the competitiveness of major global financial centers based on quantitative measures from the World Bank, UN and other sources. .
The quality of IFCs is measured by different aspects such as perceptions of the rule of law, transparency, global connectivity, ICT connectivity, crime, availability of decent schools for people who wish to settle there. and quality of life, explains Napier. He believes Nairobi can give other IFCs in Africa significant competition. Its big advantage, he adds, is that “it’s a place where people really want to come and live.”
Prudential and TheCityUK took early action in NIFC
The NIFC aims to create national and international savings and investment opportunities, create jobs in the financial services and related sectors, and help Kenyan businesses increase their competitiveness through increased access to long-term capital at lower cost and on better terms. Already, Prudential, one of the UK’s oldest insurance companies, has submitted a letter of intent to apply to join the hub, positioning itself as one of the centre’s flagship clients. The NIFC also signed a memorandum of understanding with TheCityUK, a body representing financial and related professional services based in the UK.
Africa’s share in international financial flows is very low, says Rague, noting that other regions have more IFCs. Kenya, he adds, has a sophisticated financial system, but financial flows are relatively low. To increase it, the country needs to attract international capital to Nairobi to help finance projects and also use Nairobi as an intermediary for financing larger projects on the continent, he said.
âAs long as local capital is not mobilized and coupled with international capital, we will continue to remain marginal compared to international capital flows,â he says.
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