Evaluation of performance of forex bureaus in Kenya

Abstract

This study’s objective was to establish whether there is any significant difference in the performances of forex bureaus in Kenya. An entire population of forex bureau operating in Kenya at 31st December in 2007 constituted the population. All financial statements were drawn for all firm over the year 2001 to 2007. About half the bureaus did not exist in 2001 such were eliminated from analysis. It was found that the highest volume of forex transaction takes place in Nairobi, followed by Mombasa. Firms in Nairobi and Mombasa exhibited highest turnover are large in capitalization, and leverage. The Net profit is however very low as compared to firms in Nakuru, Malindi, Eldoret and Kisumu. Though low, the returns are unlike firms in other town.

For investors, it is advisable to plant forex firms in towns outside Nairobi and Mombasa for beginners. For customers, it is cheaper to transact in Nairobi to Mombasa where competition amongst firms caused exchange rates to be favourable to a client seeking to transact. Secondary data on financial performance of forex bureaus was obtained from forex bureaus financial statements as compiled by the Central Bank, Bank Supervision Department. The data was analysed using Ms Excel statistical package to obtain averages of various financial ratios for the forex bureaus in Kenya. In order to test the hypothesis, T - tests were done while comparing the various town's bureaus performances in Kenya.

Eighteen ratios were analysed, six of them indicated that there was a significant difference in performances while twelve ratios did not. Therefore indeed there are no differences in performances for forex bureaus in Kenya.