A Survey of Exchange Rate Fluctuation on Tea Export Earnings among Smallholder Tea Factories in Kenya

Abstract

Foreign exchange earnings are normally translated to local currency. The Kenya shilling will allow the exporter to meet local obligations which are denominated in local currency. There is always period between which transactions are concluded and the time payment is received. It is rare for the exchange rate at the time of receipt to be equal to the exchange rate when the transaction took place. The differences in the two rates will lead to either an exchange gain or exchange loss. Tea Export Trade at Mombasa Tea Auction is conducted in US dollar being the official hard currency in accordance with Kenya Government Policy as per Exchange Control Circular No. 5/92/13 of 15/10/92 (EATTA, 2010). The dollar being the official hard currency at Mombasa Tea Auction could affect earnings among tea exporters in Kenya. This study sets out on a survey to establish how earnings among smallholder tea factories is affected by this arrangement. The smallholder tea factories are managed by KTDA Ltd on behalf of smallholder tea growers.

Keywords: Kenya Shilling, Tea Export, Exchange Rate, US Dollar, Export Earnings