Kenyan Investors’ Dollar Deposits Surge to $8.6 Billion, Reflecting Shilling Volatility

Afaf Fahchouch
Afaf Fahchouch
2 Min Read
Kenyan Investors' Dollar Deposits Surge to $8.6 Billion, Reflecting Shilling Volatility

Recent data from the Central Bank of Kenya (CBK) reveals a significant increase in dollar deposits held by Kenyan corporates and affluent investors, reaching a total of $8.6 billion by September 2023. This surge in foreign currency deposits, accounting for 70 percent of all forex deposits, underscores the growing trend of diversifying assets amidst a challenging economic landscape.

According to the CBK, firms alone amassed $6 billion in foreign currency deposits by the end of the third quarter of 2023, marking a substantial rise compared to household deposits totaling $2.6 billion. This shift towards dollar-denominated holdings reflects concerns over the weakening of the Kenyan shilling, which depreciated by over 25 percent against the dollar in the previous year.

The steady increase in foreign currency deposits, particularly by commercial banks, has been attributed to several factors including the expansion of regional operations and the pursuit of hard currency loans. Former CBK Governor Dr. Patrick Njoroge highlighted the pivotal role of local banks in driving the growth of these deposits, emphasizing their utilization in lending activities rather than mere hoarding.

While the nominal value of dollar deposits has seen a notable uplift due to currency depreciation, experts suggest that real growth may be more moderate. Nevertheless, the allure of dollar-based investments remains strong among Kenyan investors seeking to mitigate the adverse effects of currency volatility on their portfolios.

The phenomenon reflects a broader trend wherein investors, wary of domestic currency fluctuations, opt for dollar assets as a hedge against economic uncertainties. With the Kenyan banking sector heavily exposed to foreign currency assets, particularly across regional subsidiaries, the significance of dollar deposits in the country’s financial landscape continues to grow.

As economic conditions evolve, Kenyan investors are increasingly embracing dollar-denominated instruments as a strategic measure to safeguard their wealth and navigate turbulent market conditions.


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