Kenya’s foreign-currency deposits hit Sh1.52 trillion as businesses build dollar reserves

Kenya’s foreign-currency deposits have climbed to Sh1.52 trillion as businesses and wealthy households build financial buffers against economic uncertainty, protect purchasing power and prepare for foreign-currency payments. The deposits, held in currencies including the US dollar, euro and British pound, increased by Sh240.57 billion over the past year, marking one of the largest annual increases in recent years.

The accumulation comes as companies manage the cost of imported goods and prepare for potential currency volatility, while investors have more options for holding foreign-currency assets through bank accounts and investment funds. Businesses account for the largest share of the deposits, reflecting their need to pay overseas suppliers, settle dollar-denominated obligations and maintain working capital in the currencies they use.

Kenya’s foreign-currency deposits reach a record

Data cited from the Kenya National Bureau of Statistics put foreign-currency deposits at Sh1.52 trillion, with the annual increase highlighting the scale of demand for foreign-currency liquidity in the banking sector. A breakdown of Central Bank of Kenya data through December 2025 shows that companies held Sh957 billion, compared with Sh386 billion held by households.

Corporates accounted for 71.3% of the deposits in that breakdown, while households held the remaining 28.7%. The figures underline the importance of business transactions in shaping foreign-currency demand, although households also maintain substantial balances as part of their savings and investment decisions.

The accumulation coincides with Kenya’s foreign-exchange reserves exceeding $15 billion, providing a buffer against external shocks. The country’s reliance on imported fuel, machinery, industrial inputs and other goods means that businesses continue to require access to foreign currency even when official reserves are strong.

Why businesses are holding more dollars

Companies have practical reasons to retain foreign currency rather than convert every receipt into shillings. Importers need dollars to settle supplier invoices, while businesses that earn revenue in foreign currency may hold those receipts until payments fall due. Maintaining matching currency balances can reduce exposure to exchange-rate movements and make cash-flow planning more predictable.

Ken Gichinga, chief economist at Mentoria Economics, said companies hold foreign currency partly because they need to settle supplier invoices denominated in dollars. He also pointed to the possibility of global interest-rate movements prompting capital flows that could weaken the shilling, raising the local-currency cost of imported goods.

Nahashon Mungai, SIB’s executive director for global markets, said corporate customers hold foreign currency primarily for cash-flow matching and dividend accumulation. He identified money remittance companies, agricultural businesses, travel and tourism operators, foreign-owned companies and public entities that bill in dollars among the major holders.

The experience of 2023, when a shortage of dollars disrupted the purchase of critical raw materials from international markets, provides further context for the current preference for liquidity. Businesses that struggled to obtain foreign currency have a clear incentive to keep larger balances available for operating expenses and supplier payments, particularly when delays could interrupt production or trade.

Melodie Ndanu, a research analyst at SIB, said corporate and retail deposit holders were adopting defensive strategies in response to economic uncertainty, inflation and the approaching 2027 General Election. She said companies were likely building buffers for operating cash flows against potential currency swings, while households were treating foreign-currency deposits as a means of preserving wealth and protecting purchasing power.

Ndanu also said some firms were taking a wait-and-see approach to investment, preserving balance-sheet liquidity until the economic and political outlook becomes clearer. Such caution can affect decisions about expansion, equipment purchases and other capital expenditure, although the underlying reasons for holding dollars differ between companies with immediate payment obligations and those retaining cash for future decisions.

Dollar funds offer investors another route to foreign currency

Foreign-currency bank accounts are only one option available to Kenyan savers. The local investment market has also expanded its range of dollar-denominated products, giving investors additional ways to hold foreign-currency assets and gain exposure to international markets.

Data reported by TechTrendsKE showed that assets in foreign-currency-denominated collective investment schemes rose from Sh95.9 billion in March 2026 to Sh110.5 billion in June, an increase of about 15% over three months. The market included 45 US dollar funds, one sterling fund and one South African rand fund, reflecting the range of currencies available to investors through collective investment schemes.

Absa Asset Management received approval for USD- and KES-denominated global multi-asset special funds, while Britam launched global investment funds providing exposure to international equities and diversified assets. These products give investors alternatives to holding foreign currency in bank accounts, particularly when they want exposure to assets beyond the Kenyan market.

The difference between deposits and investment funds matters for understanding the wider trend. Bank deposits provide liquidity for payments and savings, while investment funds offer exposure to underlying assets according to their mandates. Growth in both categories points to the importance of foreign-currency exposure in financial planning, although the two pools of assets should be measured separately.

Remittances and banks sustain foreign-exchange flows

Remittances from Kenyans living abroad remain a major source of foreign currency. Central Bank of Kenya data cited in the deposit report showed that inflows reached $451.8 million in August 2026, up 6% from $426.1 million in August 2025. Over the 12 months to August, however, remittances declined by 1.3% to $5.01 billion from $5.08 billion in the preceding comparable period.

Banks and payment companies play a central role in moving these funds into the country. I&M Bank Group chief executive Kihara Maina said the bank had developed remittance partnerships and provided liquidity to remittance companies, putting I&M’s share of Kenya’s remittance flows at about 25%.

Equity Bank has also expanded access to foreign-exchange transactions through preferential rates for eligible customers using its digital channels. These services help individuals and businesses convert currencies and manage payments, while remittance providers connect international receipts with the domestic financial system.

The movement of remittances into Kenya does not necessarily translate directly into higher foreign-currency deposits. Recipients may retain money in dollars, convert it into shillings or use it to pay household expenses. The share ultimately held in foreign currency depends on the financial choices of recipients and the timing of their needs.

Economic uncertainty shapes corporate cash decisions

The outlook for the US dollar is another consideration for businesses and savers. Expectations of higher American interest rates can support demand for dollar-denominated assets, depending on the Federal Reserve’s policy direction and how investors assess returns across markets. A stronger dollar can increase the shilling cost of imported goods, reinforcing the need for importers to manage their currency exposure.

For companies, the decision to maintain larger foreign-currency balances involves weighing the cost of holding cash against the risk of being unable to meet payments when due. Money kept in a bank account may earn less than funds invested in productive assets, but it can also provide protection against exchange-rate volatility and disruptions to access to foreign exchange.

The trade-finance market illustrates why liquidity remains important. Family Bank secured a $10 million African Development Bank facility intended to widen trade-finance access for Kenyan businesses, including firms in manufacturing, agriculture, healthcare and renewable energy. Such financing supports businesses that need to pay suppliers and obtain imported inputs as part of their operations.

At the same time, lower returns on conventional savings products may influence how investors allocate their money. TechTrendsKE reported that average money-market fund returns had fallen to 9.3% after fees from 9.9% a year earlier, alongside lower Treasury-bill and commercial-bank fixed-deposit rates. These changes provide additional context for the search for alternative investments, although the appeal of foreign-currency holdings also depends on conversion costs, account returns and movements in the shilling.

Kenya’s growing foreign-currency deposits therefore reflect several overlapping needs: companies must finance trade and manage payment obligations, households seek to preserve wealth, and investors have more options for gaining exposure to foreign-currency assets. The balance between operating liquidity and longer-term investment decisions will remain important as businesses and households navigate currency risk, inflation and the economic uncertainty ahead of the 2027 General Election.

Go to TECHTRENDSKE.co.ke for more tech and business news from the African continent and across the world.

Follow us on WhatsApp, Telegram, Twitter, and Facebook, or subscribe to our weekly newsletter to ensure you don’t miss out on any future updates. Send tips to editorial@techtrendsmedia.co.ke