By Christopher Makombe
A few individual forex traders have been operating online forex trading in Tanzania through international brokers for quite 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 is the trading of currencies in global financial markets through brokerage platforms. Any other form such as network marketing where individuals are paid by adding members into the chain using the name forex trading does not represent forex trading.
By forex trading, we mean the buying and selling of global currencies in anticipation of a future increase or decrease in the value of those currencies through broker platforms with a view to making a profit.
The benefits of online forex trading include generating income for Tanzanian citizens once traders become profitable and start making money from the markets. Registered companies, investment funds and large corporations can also open margin accounts with brokers and start trading on their own funds and generate income for investors.
This creates employment opportunities for traders themselves but also for staff who will be employed to work in new brokerage firms to be opened as well as in forex investment funds. Tanzanians who are willing to learn and take risks in the financial markets through online forex trading, regardless of age, race or gender, can be educated in trading for themselves.
The good thing about forex trading is that the capital required can be affordable (with some brokers one can start with as little as Sh200,000) 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 education and mentorship to be successful in forex trading.
The other benefit is the expansion of financial inclusion by allowing more Tanzanians to participate in the world’s largest foreign exchange financial market through their own transactions or investments in foreign exchange funds.
This sector has the potential to provide employment opportunities for at least more than 10,000 Tanzanians.
The government should speed up online forex trading legislation so that people can start taking advantage of the opportunities available in the global forex markets. It is also important to note that the foreign exchange market is the largest financial market in the world.
Forex trading enhances the skill of the Tanzanian trader in regional and international markets. Instead of sitting back and watching citizens of other nations take advantage of global markets, Tanzanians will be part of this development and will benefit fully.
Forex trading does not need huge investments in infrastructure to get started. You just need internet access and proper training in the forex markets. Moreover, business activities do not need traditional business requirements of marketing costs, finding customers, etc.
Generating revenue for the government in the form of taxes from profitable traders as well as brokerage firms is also another benefit of forex trading.
Despite these advantages, the industry currently faces many challenges, including the lack of government regulation on online currency trading in Tanzania. This has stopped a number of international forex brokers from wanting to come and start business in this country.
There is also a lack of advanced understanding and education of financial markets among citizens regarding the opportunities and challenges of online retail forex trading. However, this gap can be filled once regulations are in place to provide guidance.
The other challenge is the lack of trading capital among traders. The majority of individual traders have a small amount of capital to allow them to take full advantage of the markets. However, they can still grow their capital over time if they become profitable.
Tanzania also faces the absence of local brokers, which forces local traders to operate through offshore brokers.
The role of the Bank of Tanzania and the Capital Markets and Securities Authority (CMSA) with regard to online retail forex trading is more of a supervisory and regulatory role, primarily brokers who will provide brokerage services enabling traders to open trading accounts with them. Issues such as capital requirements, leverage, etc. can be dealt with in the regulations.
It is therefore important that the Bank of Tanzania and the Capital Markets and Securities Authority work to introduce regulations and officially allow forex trading in Tanzania to enable many more Tanzanians to take advantage of this growing opportunity on global financial markets. Our neighboring East African countries like Kenya and Uganda, for example, are already profiting from forex trading by having government regulations in place. This has attracted foreign brokers to open offices in these countries and thus provide employment opportunities to their people.
Don’t wait any longer, now is the time! The market can employ a lot of people, including our young university graduates who find it to find jobs.