The influence of the global credit crunch on Foreign Direct Investment (FDI) inflows in Kenya

Abstract

The world had experienced three global economic problems in the same span of time of 2007-2009, namely, the global financial crisis resulting into the global credit crunch, oil crisis and food crisis. One of the global problems had been the global financial crisis that resulted into the global credit crunch thereby influencing the level of FDI inflows in several countries. The purpose of this study was to look into the case of Kenya with reference to the influence of the global credit crunch on foreign direct investment (FDI) inflows in Kenya. The methodology used was to collect primary data from Kenya Investment Authority through the interview process and corroborate that data with secondary data from published reports so as to establish the challenges that faced FDI inflows in Kenya. Secondary data was also collected to determine the influence of the global credit crunch on FDI inflows in Kenya. The data was subjected to data analysis whereby conclusions were drawn from the analysis. The research findings indicated that there were a myriad of challenges that faced FDI inflows in Kenya. These included lack of good governance, political instability, lack of consistent structural reforms, poor growth performance, corruption, crime, post-election violence, deteriorating infrastructure, small market size and high cost of doing business. These challenges were noted during the interview with a senior official of Kenya Investment Authority and corroborated with every literature that was reviewed. According to the qualitative data analysis presented in Chapter 4 in Table 1, these challenges appeared to be common, revolving and recurring over a number of years. Also, on the influence of the global credit crunch on FDI inflows in Kenya the research findings suggested that the global credit squeeze influenced the low levels of FDI inflows in Kenya as depicted in depressed levels of real gross domestic product (GDP) and decreased GDP growth rates analyzed in Table 2 and Table 3.