EXPLAINED: Why Kenyan Start-Ups Are Funded in Dollars
Kenyan start-ups have secured seed funding running into billions of shillings from regional as well as global investors, which is often in American dollars.
Norfund East Africa Director William Nyaoke explained that the preference of the dollar currency is to cushion themselves from the fluctuation of the foreign exchange (FX) rates.
Nyaoke, who commented on a Norfiunds Ksh3.1 billion joint investment, revealed that investors particularly look out for firms that trade in the dollar for ease of business.
A photo of Norfund and Ethos East Africa Director William Nyaoke.
“FX consideration is usually part of our evaluation and since is a dollar-dominated company and we are a dollar investment company.
“It was an easier match because we did not have to worry about how the dollar is going to behave because they earn dollars, we invest in dollars they pay us in dollars,” he told NTV’s Julians Amboko.
Nyaoke disclosed that the current tightening of the dollar by the Central Bank of Kenya (CBK) made the firm evaluate its risk appetite; the amount of risk that an organization is willing to accept in pursuit of its strategic objectives.
He added that if the firm operated using the Kenyan shilling it would mean consistent meetings to work out the investment while sustaining the business.
The director explained that the firm considered the long-term effects of the FX market clarifying that it was part of the risks involved in the investment business.
Nonetheless, he pointed out that there was optimism that the market would stabilise itself.
“We know that the market will always have shocks and volatilities. As long as the fundamentals of the business or country remain solid, we look at the bigger picture,” he Nyaoke remarked.
Among the local firms which have bagged funding include construction tech company Jumba which received Ksh567 (USD4.5 million) capital injection to boost its growth.
On February 2, internet service provider Mawingu announced that it received Ksh1.1 billion from three investors to expand its growth.
Jumba Company team poses for a photo.