Enhancing the Financial Derivatives Market in Kenya: Challenges, Opportunities and Strategic Recommendations

Purpose: The purpose of this article is to examine how the financial derivatives market in Kenya can be enhanced and to identify strategies for promoting its growth. The research is guided by the central question: How can we enhance the growth of the financial derivatives market in Kenya? Methodology: The article employs a mixed-methods approach, combining textual analysis of previous literature, reports, and articles with a qualitative survey. The qualitative data was collected using a snowballing approach, which involved distributing questionnaires and conducting interviews with multiple sources, including the Capital Market Authority. Findings: The study's findings emphasize the necessity of establishing a robust regulatory framework to govern the financial derivatives market in Kenya. Key points include: The importance of clear rules and regulations for financial institutions involved in derivative trading, the need for enhanced regulatory oversight to mitigate risks such as fraud, manipulation, and insider trading, which are prevalent in less regulated markets, the benefits of increased transparency and accountability in the derivatives market to build investor trust and encourage participation. Unique Contribution to Theory, Practice and Policy: The article recommends several steps to develop a more resilient and sustainable derivatives market in Kenya: Strengthen regulatory frameworks and enforce clear rules for derivative trading, Implement measures to enhance transparency and accountability, Strengthen risk management practices within the market, Promote investor education to ensure market participants are well-informed, By addressing these challenges and implementing the recommended solutions, Kenya can unlock the full potential of its financial derivatives market, thereby promoting economic growth and stability in the region.