By Christopher Makombe
Some individual FX retailers have been engaged in online FX trading in Tanzania through international brokers for some time.
It is the availability of internet access and leverage in the forex industry that has attracted many retail traders who otherwise could not participate due to capital or infrastructure constraints.
Forex trading is the trading of currencies on the global financial markets through broker platforms. Any other form such as networking marketing where individuals are paid by adding members in the chain using the name forex trading does not constitute forex trading.
By forex trading we mean the buying and selling of global currencies in anticipation of future appreciation or depreciation of those currencies through brokerage platforms with the goal of making a profit.
The benefits of online forex trading include income generation for Tanzanian citizens once the traders become profitable and start making money from the markets. Registered companies, mutual funds and large corporations can also open margin accounts with brokers and start trading their own funds and generate income for investors.
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It creates employment opportunities for traders themselves, but also for employees who are hired to work in brokerage firms that are about to open, as well as forex mutual funds. Tanzanians who are willing to learn through online forex trading and take risks in the financial markets, regardless of age, race or gender, can be trained to trade for themselves.
The good thing about forex trading is that the capital requirements can be affordable (you can start with as little as Sh200,000 with some brokers) as 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. It takes proper training and mentoring to be successful in forex trading.
The other benefit is expanding financial inclusion by allowing more Tanzanians to participate in the world’s largest financial market for foreign exchange through self-trading or investing in foreign exchange funds.
This sector has the potential to provide employment opportunities for at least more than 10,000 Tanzanians.
The government should push ahead with online forex trading legislation so that people can start taking advantage of the opportunities that are available in the global forex markets. It is also important to note that the forex market is the largest financial market in the world.
Forex trading improves the skills of Tanzanian traders in the regional as well as international markets. Rather than sit and watch as citizens of other nations take advantage of global markets, Tanzanians will become part of this development and take full advantage of it.
Forex trading does not require a large investment in infrastructure to get started. All you need is access to the internet and a proper education in the forex markets. In addition, trading business does not need traditional business needs such as marketing costs, customer search, etc
Another benefit of forex trading is the generation of income for the government in the form of taxes from profitable traders and brokerage firms.
Despite these advantages, the industry is currently facing many challenges including lack of government regulations for online foreign exchange trading in Tanzania. This has deterred a number of international Forex brokers from coming and doing business in this country.
There is also a lack of advanced understanding of financial markets and citizen awareness of the opportunities and challenges of online retail forex trading. However, this gap can be closed once the regulation provides guidance.
The other challenge is the lack of trading capital among traders. The majority of individual traders have little capital to take full advantage of the markets. However, they can grow their capital more and more over time as they become profitable.
Tanzania also faces a lack of local brokers, forcing local traders to operate through offshore brokers.
The role of the Bank of Tanzania and the Capital Markets and Securities Authority (CMSA) in relation to online retail forex trading is more of a supervisory and regulatory role, mainly by brokers who offer brokerage services that allow traders to open trading accounts with them . Issues such as capital requirements, leverage, etc. can be addressed in the regulation.
It is therefore important that efforts are made by the Bank of Tanzania and the Capital Markets and Securities Authority to introduce regulations and officially allow forex trading in Tanzania so that many more Tanzanians can take advantage of this growing opportunity in the global financial markets. Our East African neighbors such as Kenya and Uganda are already using forex trading by enacting government regulations. This has enticed foreign brokers to open offices in these countries, creating employment opportunities for their employees.
We shouldn’t wait any longer, the time is now! The market can employ many people, including our young graduates from universities who find it difficult to find jobs.
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