The Factors Driving Foreign Direct Investment Inflows in Kenya:1980 - 2020

Abstract

In the last 60 years, the government of Kenya has used numerous policy attempts to attract more signifi-cant FDI. Despite these efforts, FDI inflows have fluctuated over time. The major goal of the study is un-covering aspects that affect FDI inflows to Kenya, including real exchange rate, inflation, GDP growth rate, corruption index, tax incentives, ease of doing business, and political stability. This paper analyzed the link between independent variables and FDI, then made policy suggestions. The method of analysis utilized time series data between 1980-2020 from World Bank development indicators and KNBS (foreign investment survey reports and economic surveys). The Ordinary Least Squares (OLS) was employed in the analysis. According to the regression analysis, our model is typically significant, and all independent variables are jointly significant in estimating FDI. GDP growth rate explains FDI flows into Kenya the most. The variables which include rate of GDP growth, inflation, real exchange rate, the ease of doing business, and corruption index had a positive influence on FDI. On the contrary, tax incentives and polit-ical stability influenced the FDI negatively. In conclusion, FDI inflows play an important role in the ex-pansion and growth of the Kenyan economy.