In a move that could potentially boost Kenya's financial sector, United States investment firm Kirk Industries has entered the market with the aim of providing innovative solutions to enhance access to loans for citizens and advocate for fair and inclusive financial practices. The company plans to introduce groundbreaking initiatives to empower individuals to access loans responsibly and rebuild their financial futures. This investment comes at a time when the absence of debt forgiveness programs in Kenya is seen as a significant barrier to financial inclusion and economic growth. Kirk Industries' decision to venture into Kenya's financial sector demonstrates its dedication to global economic development and social impact [c600ef0f].
India, in particular, has seen a significant decline in foreign direct investment (FDI) inflows. In the second quarter of the financial year 2022-23, FDI declined by 7.3% compared to the previous quarter. The computer software and hardware sectors, trading, and construction were the most affected industries. The cumulative FDI flows in the first half of the financial year declined by 15.1%. The service sector, including financial, banking, and business outsourcing, also experienced a decline in FDI. This decline in FDI inflows into India is a cause for concern as it has adverse implications for the global FDI cycle. The Reserve Bank of India's State of Economy report highlighted the slump in the global FDI cycle. China also reported an FDI deficit, reflecting a de-risking of global value chains away from China. India has positioned itself as a favorable destination for Western companies to diversify their global value chains, but the Indian government must ensure its policy choices remain adaptive to fully capitalize on this opportunity.
Similarly, Kenya has also faced job losses and investor outflow due to a negative investment sentiment and the high cost of doing business. Between October 2022 and November 2023, Kenya lost 70,000 jobs in the formal sector, according to the Federation of Kenya Employers (FKE). The FKE attributed the job losses to the high cost of doing business and a negative investment sentiment. The Finance Act 2023, which introduced new taxes, made the cost of doing business unsustainable. The outflow of investors from Kenya is also contributing to the job losses. British company De La Rue cut down operations and laid off 300 employees due to reduced orders from the Central Bank of Kenya.
The decline in foreign investment in both India and Kenya has had a significant impact on their job markets. The loss of jobs in these countries not only affects individuals and families but also has broader implications for economic growth and development. Both countries need to address the challenges and uncertainties in the global economy to attract and retain foreign investment, which can help create more job opportunities and drive economic growth.
Kenyan companies have been cutting jobs for the third consecutive month due to rapid inflationary pressures, cash flow challenges, and declining customer spending. The report by Stanbic Bank Kenya's Purchasing Managers Index (PMI) highlights sustained contractions in activity and new business. The private sector has experienced increased job losses, weaker output, and reduced workloads. Rising input and purchase price pressures, including fuel prices, electricity costs, and taxes, have contributed to the economic challenges [bf2f5366].
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