Impact Of Differential Currencies On Performance Of Small Scale Cross Boarder Entrepreneurs In The East African Community: A Case Of Namanga Border

ABSTRACT

Entrepreneurship in East Africa is in its infant stage and is growing rapidly. The

most important entrepreneurship area is the development of small scale

entrepreneurs (SSEs), the sector which is facing several challenges due to economic

instability of the East African countries. This study aims to investigate the impact of

the use of differential currencies on the performance of cross border SSEs in East

African Community, a case of Namanga border. Data for this study were collected

using field observation, questionnaires and interview. The study showed that there

was a good performance in daily businesses of the cross border SSEs in which 77%

of the 31 money vendors and 57.1% of the 70 other SSEs respondents ranked the

cross border business as good and above. Also the data revealed that, the cross

border SSEs stay longer in the business and the businesses attract more new

recruitments.

It was also observed that there was currency loss and gain for SSEs when calculated

by spot exchange rate and through SSEs responds, whereby money vendors gain

while other SSEs lose about 2 TShs for each 1 KShs in exchange, and even more

through buying commodities from Kenya side. Furthermore, in currency volatility

when compared to the United States of America Dollar (US Dollar), 77% of

respondents showed that Tanzania currency is more volatile than Kenya currency.

That means the currency and economy of the studied East African countries is more

unstable than the US Dollar, and hence resulted in SSEs income fluctuation. The

SSEs in cross border business face various challenges including the use of difference

currency, lack of SSEs knowledge and skills, common market and social services. As

vii

such, the use of common currency, establishment of common market and SACCOS,

entrepreneurship training as well as soft loan availability could be an opportunity for

improving the performance of cross border SSEs businesses in particular at Namanga

border.

The study concluded that, the use of different currencies and currency stability are

the key parameters in defining the performance of the Tanzanian SSEs in cross

border businesses at Namanga. As such proper measures such as the use of common

currency and formation of common market should be taken into consideration for

development of such an important sector.