Challenges of Implementing Foreign Direct Investments (Fdi) at United Bank for Africa (Uba) Kenya

Abstract

Internationalization is referred to as the process of engaging in productions of goods and services beyond national frontiers. Organizations may engage in such ventures either incrementally starting with low commitment modes such as export, licensing and joint ventures then increase gradually to the high commitment modes of foreign direct investments. This study was set to establish the challenges of implementing foreign direct investment at United Bank for Africa Kenya. United Bank for Africa (UBA) Kenya business strategy has been wholly owned subsidiary as the only entry mode without engaging in prior low commitments such as exporting and licensing and increase to higher commitment modes such as foreign direct investments. The objective of the study was to determine the challenges UBA Kenya has faced in implementing foreign direct investment as an entry mode as well as how it has responded to the challenges it has faced. The theories of international business such as eclectic paradigm theory, transaction cost theory and OLI theory has been used by many to explain the existence of FDI. This study adopted a case study approach to determine if the theories can explain UBA Kenya’s preference of wholly owned subsidiaries as the entry mode choice in all its foreign operations. The researcher used both primary data collected with an aid of an interview guide and secondary data was collected through review of contents of various relevant publications and reports at the bank. This data was later analyzed through content analysis and presented in form of narrative. The findings from the study suggest that the organization has encountered challenges in implementing foreign direct investment that include; lack of acceptance in the Kenyan market, long turnaround time in loan approvals, also the bank adopted operational policies of the parent company which are not in tandem with the Kenyan banking industry, the Central Bank of Nigeria directive restricting repatriation of funds to non performing subsidiaries in host countries. The study further found that the organization has at the same time come up with ways of countering the challenges it has had in implementing the foreign direct investment. United Bank for Africa has formulated strategies to aid in addressing the challenges it has faced. The bank is carrying out a lot of advertising and awareness to dispel the notion that United Bank for Africa Kenya is a Nigerian Bank. The bank has changed to a polycentric policy whereby it has recruited Kenyans to the Head of Functions and currently has only two positions being filled by expatriates to give the bank a Kenyan face. The bank has created policies that are applicable to Kenya and has had them approved by the group board. The bank is determined to ensure it changes the way people bank in Kenya by introducing innovative products and services to the market. The study recommends that organisations should do a comprehensive research before investing in a new market. Companies should research on the products being offered by competitors and assess whether they are able to offer these products so as to be able to compete. It also recommends that the policy makers should put in place strict rules and regulations to guide foreign direct investment in Kenya. This is to ensure that subsidiaries formed within Kenya are sufficiently independent from their parent companies to be able to make rational decisions based on the market in which they are operating.