Why there’s a need for online retail forex trading in Tanzania

By Christopher Makombe

A few individual retail forex traders have been operating in online forex trading in Tanzania via international brokers for some time now.

It is the availability of internet access and leverage in the forex industry that has attracted many individual traders who could not otherwise get involved due to capital or infrastructure constraints.

Forex trading involves trading currencies in the global financial markets via broker platforms. Any other form such as networking marketing where individuals get paid by adding members in the chain using the name forex trading is not forex trading.

By forex trading we mean buying and selling of global currencies in anticipation of future increase or decrease in value of those currencies via brokers platforms with a view of making profits.

The benefits of online forex trading include income generation for Tanzanian citizens once traders become profitable and start making money from the markets. Registered companies, investment funds and large corporates can also open margin accounts with brokers and start trading on their own funds and generate income for investors.

It creates employment opportunities for traders themselves but also staff who will be employed to work in new brokerage firms to be opened as well as forex investment funds. Tanzanians who are ready to learn and take risks in the financial markets through online forex trading regardless of their age, race or sex can be trained to trade for themselves.

The good thing about forex trading is that capital requirement can be affordable (in some brokers one can start with as low as Sh200,000) since the use of leverage allows traders to trade more than their initial investments. The most important thing before getting involved in forex is to educate yourself on the subject, one needs proper education and mentorship to succeed in forex trading.

The other benefit is widening of financial inclusion by allowing more Tanzanians to participate in the global largest financial market of foreign exchange through own trading or investment in forex funds.

This sector has a potential of providing employment opportunities to more than 10 000 Tanzanians at a minimum.

The government should expedite the legislation on online forex trading so that people can start taking advantage of the opportunities available in the global forex markets. It is also important to note that forex market is the largest financial market in the world.

Forex trading improves Tanzania trader’s competence in the regional as well as international markets. Instead of sitting and watching citizens of other nations taking advantage of global markets, Tanzanians will become part of that development and take full benefit from it.

Forex trading does not need huge infrastructure investment to start. You just need access to the internet and proper education on the forex markets. In addition trading business does not need traditional business requirements of marketing costs, looking for customers etc

Income generation for the government in form of taxes from profitable traders as well as brokerage companies is also another benefit of forex trading.

Despite these benefits, the industry is currently facing many challenges including lack of government regulations on online forex trading in Tanzania. This has stopped a number of international forex brokers who would like to come and start business in this country.

There is also lack of advanced financial markets understanding and education among citizens regarding retail online forex trading opportunities and challenges. However, this gap can be filled once the regulation is in place to provide guidance.

The other challenge is lack of trading capital among traders. Majority of individual traders have small capital to enable them to take full advantage of the markets. However they can always grow their capital over time if they become profitable.

Tanzania also face absence of local brokers and hence forcing local traders to operate via offshore brokers.

The role of the Bank of Tanzania and Capital Markets and Securities Authority (CMSA) regarding retail online forex trading is more of supervisory and regulatory mainly of brokers who will be providing brokerage services allowing traders to open trading accounts with them. Issues such as capital requirements, leverage etc can be dealt with in the regulation.

It is therefore important that the Bank of Tanzania and the Capital Markets and Securities Authority should make efforts to bring in regulations and officially allow forex trading in Tanzania to allow many more Tanzanians to take advantage of this growing opportunity in the global financial markets. Our neighboring East African countries like Kenya and Uganda for example are already taking advantage of the forex trading by having government regulations in place. This has attracted foreign brokers to open offices in these countries and thus providing employments opportunities for their people.

We should not wait any further, the time is now! The market can employ a lot of people including our young graduates from universities who are finding it to find jobs.