EXPLORING THE MONEY EXCHANGE

BUSINESS IN ZANZIBAR

Project Report submitted to

“The Institute of Commercial Management”
In partial fulfillment for the award of the degree of

Graduate Diploma in Management Studies

By
Hussein Ismail Hussein
Student number: 2212358

Under the guidance of

Mr. Rany Chowdhury

Principal
“Zanzibar College of Business & Management”
Zanzibar, Tanzania.

Duration: June 2016 to May 2017

1
This project report mainly dealing with the following area
in “Royal Bureau De Change”:
 Analyzing and maintaining the transaction systems.
 Characteristics of money exchange Business
 Role of Bank of Tanzania On exchange Business in Zanzibar.

About this research project report:

This Project Report is a part of my “Graduate Diploma in Management studies”

under “The Institute of Commercial Management” at “Zanzibar College of
business & management”. The purpose of this research case study is to know
about THE MONEY EXCHANGE BUSINESS IN ZANZIBAR.

Declaration:

I hereby declare that this Project Report titled “EXPLORING THE MONEY
EXCHANHGE BUSINESS IN ZANZIBAR” submitted by me is a bonafide work
under taken by me and it is not submitted to any other University or Institution
for the award of any degree/ diploma / certificate or published any time before.
The data collected for this survey is just an estimated data to build the concept
on how the organization works.

Name and Address of the Student Signature of the Student

2
Date:
 ACKNOWLEDGEMENT

First and foremost, I thank the Almighty Allah for his perpetual showers of
blessings, which led me to the successful completion of my project.

I take this opportunity to express my deep sense of gratitude to all those who
have helped me throughout this project. It gives me immense pleasure to
acknowledge all those who have rendered encouragement and support for the
successful completion of this work.

I would like to give special acknowledgement to The Directors and all the
working staffs of “Royal Bureau De Change” for their consistent support
and motivation.

I am grateful to Mr Rany Chowdhury, Principal of “Zanzibar College of

Business & Management” for his technical expertise, advice and excellent
guidance and giving me proper directions and Suggestions throughout this
project.

I am indebted to my other faculty members who gave time and reviewed

portions of this project and provided many valuable comments.

I would like to thank all those who have directly or indirectly contributed to
the success towards my work.

3
 TABLE OF CONTENTS

Chapter Page No.

Title
5 List of Charts
1 6 Introduction
7-8 About Company
2 9 Objective of the study
3 10-11 Research Methodology
12 Need and importance of the study
13-14 Analyzing and Maintaining the Transaction
Systems
4 15-16 Characteristic of Money Exchange business
17-20 Role of B.O.T on Money Exchange Business
in Zanzibar
5 21-30 Data Analysis and Interpretation
31 Findings of the study
6 32-33 Suggestions
34 Limitations
7 35 Conclusion
8 36 Bibliography

4
 LIST OF CHARTS

Chart Page TITLE

No. No.
4.4.3 18 Administration of foreign exchange in Tanzania
5.1.1 23 Exchange Rate fluctuation effect – Higher to
Lower
5.2.1 25 Exchange Rate fluctuation effect – Higher to
lower
5.3.1 27 Exchange Rate fluctuation effect – Lower to
Higher
5.4.1 29 Exchange Rate fluctuation effect – Lower to
Higher
5.5 30 Tanzanian Shilling - Us Dollar Exchange Rates
Over The Last Five Years
5.7 29 Level of satisfaction of Customer Service

5
 Chapter 1

1.1- Introduction

The world nations are increasingly becoming more interrelated global trade, and
global investment. These international result in cross country flow of world
nations. Countries hold currencies of other countries and that a market, dealing
of foreign exchange results.

Let us consider a case where Tanzanian company exports Spices to USA and
invoices the goods in US dollar. The American importer will pay the amount in
US dollar, as the same is his home currency. However the Tanzanian exporter
requires Shillings means his home currency for procuring raw materials and for
payment to the labor charges etc. Thus he would need exchanging US dollar for
Shillings. If the Tanzanian exporters invoice their goods in Shillings, then
importer in USA will get his dollar converted in Shillings and pay the exporter.
From the above example we can infer that in case goods are bought or sold
outside the country, exchange of currency is necessary.

Foreign exchange means reserves of foreign currencies. More aptly, foreign

exchange refers to claim to foreign money balances. Foreign exchange gives
resident of one country a financial claim on other country or countries. All
deposits, credits and balances payable in foreign currency and any drafts,
travelers’ cheques, letters of credit and bills of exchange payable in foreign
currency constitute foreign exchange. Foreign exchange market is the market
where money denominated in one currency is bought and sold with money
denominated in another currency. Transactions in currencies of countries,
parties to these transactions, rates at which one currency is exchanged for other
or others, ramification in these rates, derivatives to the currencies and dealing in
them and related aspects constitute the foreign exchange (in short, forex)
market.

This report aims to “EXPLORING MONEY EXCHANGE BUSINESS IN

ZANZIBAR”

6
 1.2- About Company

Royal Bureau De Change is a leading Money exchange bureau listed in Zanz-

ibar, Tanzania. The business has been started at the beautiful island zanzibar in
Tanzania. The 15 years old enterprise, founded in 2002 by its owner Mr Ismail
Hussein Ismail, is one of Zanzibar’s most trustable foreign exchange places. It
has been licensed by Tanzania Revenue Authority and Zanzibar Revenue board
to operate foreign currency exchange business under Bank Of Tanzania’s rules
and regulation. Currently the business has four front desk operator to serve its
customer and the owner himself control and monitor daily activities done by the
operator. The core business of Royal Bureau De Change is buying and selling
different foreign currency and earns profit as per the policies settled by “Bank
ofTanzania”.

Royal Bureau De Change deals with different foreign currencies which are
widely available and demandable e.g. - US Dollar , Euro , Sterling Pound ,
Omani Riyal ,UAE Dirham , Saudi Riyal , South African Rand , Chinese Yuan ,
Australian Dollar , Canadian Dollar , Swiss Franc , Danish Kroner , Swedish
Kroner , Norway Kroner , Indian Rupee , Kenyan shillings and Qatar riyals.

7
Royal Bureau De Change has created the ability to distribute value across the
foreigner’s and other business customer’s necessity. Royal Bureau de Change
established an example to offer the best reasonable rates possible in Zanzibar
and it has one unique way to inform its loyal customers and visitors about the
change of the price as per their requirement.

Royal Bureau De Change has operating capital of 100 million Tanzania

shillings as of now and they do transaction approximately $42,000 daily in
different currency.

8
 Chapter 2

Objectives of the study

The primary Objective of this project is to explore the money exchange business
in Zanzibar.

And the Secondary Objectives of this project are as following:

 To study and understand the foreign exchange.

 To study and analyze the revenues of the company when the exchange
rates fluctuate.
 To analyze income statement and find out the revenues when the
dollars are converted into Tanzanian Shillings.
 To know about the various concept and technicalities in foreign
exchange.
 To know the various functions of forex market.
 To get the knowledge about the hedging tools used in foreign
exchange.
 Study types of currencies traded and how they are traded
 Study FOREX trading strategies and techniques
 Apply commonly used strategies for FOREX Trading

9
 Chapter 3

Research Methodology

Research methodology is a way to systematically solve the research problems. It

may be understood as a science of studying how research is done scientifically.
It includes the overall research design, the sampling procedure, data collection
method and analysis procedure.

3.1 RESEARCH PROCESS:

The research Process used for the study was descriptive research. It includes
fact-finding enquiries of different kind. Random sampling technique was used
in selecting the samples. The data was collected through survey method. The
data analysis was done on the basis of the information available from various
sources and brainstorming.

3.2 NATURE OF THE DATA:

Primary data:
 The primary data was collected through interviews of professionals and
observations.
 Their responses are collected from them and used for analysis.
 Data obtained from the internet
 Data obtained from Organization

Secondary data:

 Data collected from various books and sites

 Organization Profiles, magazines, articles and past history
 Data obtained from BOT, Zanzibar, Tanzania
 Data was collected from books, newspapers, other
publications and internet.

10
3.3 SIZE OF THE SAMPLE:

It is the act of choosing the number of observations or replicates to include in a

statistical sample. The sample size is an important feature of any empirical
study in which the goal is to make inferences about a population from a sample.
It is a number of observations in research.

In this study, Income statement has been collected from Royal Bureau De
Change and analysed deeply.

11
 Chapter 4

4.1 - NEED AND IMPORTANCE OF THE

STUDY

Foreign exchange transactions take place whenever a country imports goods and
services, people of a country undertake visits to other counties, citizens of a
country remit money abroad for whatever purpose, business units set up foreign
subsidiaries and so on. In all these cases the nation concerned buys relevant and
required foreign exchange, in exchange of its currency, or draws from foreign
exchange reserves built. On the other hand, when a country exports goods and
services to another country, when people of other countries visit the country,
when citizens of the country settled abroad remit money homewards, when
foreign citizens, firms and institutions invest in the country and when the
country or its business community raises funds from abroad, the country’s
currency is bought by others, giving foreign exchange, in exchange.

Multinational firms operate in more than one country and their operations
involve multiple foreign currencies. Their operations are influenced by politics
and the laws of the counties where they operate. Thus, they face higher degree
of risk as compared to domestic firms. A matter of great concern for the
international firms is to analyze the implications of the changes in interest rates,
inflation rates and exchange rates on their decisions and minimize the foreign
exchange risk.

The importance of the study is to know the features of foreign exchange and the
factors creating risk in foreign exchange transactions.

12
 4.2 - Analyzing & Maintaining the
Transaction Systems

4.2.1 Definition of International Trade:

International trade refers to trade between the residents of two different
countries. Each country functions as a sovereign state with its own set of
regulations and currency. The difference in the nationality of the export and the
importer presents certain peculiar problem in the conduct of international trade
and settlement of the transactions arising there from.

Important among such problems are:

a) Different countries have different monetary units;
b) Restrictions imposed by counties on import and export of goods:
c) Restrictions imposed by nations on payments from and into their
countries;
d) Different in legal practices in different countries.

The existing of national monetary units poses a problem in the settlement of

international transactions. The exporter would like to get the payment in the
currency of own country. For instance, if American exporter of New York
export machinery to Tanzanian shillings will not serve their purpose because
Tanzanian shillings cannot be used as currency inn Shillings. Thus the exporter
requires payment in the importer’s country. A need, therefore, arises for
conversion of the currency of the importer’s country into that of the exporters
country.

4.2.2 Foreign exchange:

Foreign exchange is the mechanism by which the currency of one country gets
converted into the currency of another country. The conversion is done by
banks who deal in foreign exchange. These banks maintain stocks of foreign
currencies in the form of balances with banks abroad. For instance, Bank of
Tanzania may maintain an account with Bank of America, new York, in which
dollar are held. In the earlier example, if Tanzanian importers pay the equivalent
shillings to Bank of Tanzania, it would arrange to pay American export at New
York in dolor from the dollar balances held by it with Bank of America.

13
4.2.3 Exchange rate:
The rate at which one currency is converted into another currency is the rate of
exchange between the currencies concerned. The rate of exchange for a
currency is known from the quotation in the foreign exchange market.

In the illustration, if Bank of Tanzania exchanged us for Tanzanian shillings at

2240 a dollar, the exchange rate between TSH and USD can be expressed as

USD 1=TSH 2240.

The banks operating at a financial center, and dealing in foreign exchange,

constitute the foreign exchange market. As in any commodity or market, the
rates in the foreign exchange market are determined by the interaction of the
forces of demand and supply of the commodity dealt, viz., foreign exchange.
Since the demand and supply are affected by a number of factors, both
fundamental and transitory, the rates keep on changing frequently, and violently
too.

14
 4.3 - Characteristic of Money Exchange
business

Some of the important characteristics which affect Money exchange

business are:

4.3.1 Balance of payment:

It represents the demand for and supply of foreign exchange which ultimately
determine the value of the currency. Exporters from the country demand for the
currency of the country in the forex market. The exporters would offer to the
market the foreign currencies have acquired and demand in exchange the local
currency. Conversely, imports into the country will increase the supply of
currency of the country in the forex market. When the BOP of a country is
continuously at deficit, it implies that demand for the currency of the country is
lesser than the supply. Therefore, its value in the market declines. If the BPO is
surplus, continuously, it shows the demand for the currency is higher than its
supply and therefore the currency gains in value.

4.3.2 Inflation:
Inflation in the country would increase the domestic prices of the commodities.
With increase in prizes exports may dwindle because the price may not be
competitive. With the decrease in export the demand for the currency would
also decline; this it in turn would result in the decline of external value of the
currency. It should be noted that it is the relative rate of inflation in the two
counties that cause changes in the exchange rates.

4.3.3 Interest rates:

The interest rate has a great influence on the short-term movement of capital.
When the interest rate at a center rises, it attracts short term funds from other
centers. This would increase the demand for the currency at the center and
hence its value. Rising of interest rate may be adopted by a country due to
money conditions or as a deliberate attempt to attract foreign investment.

4.3.4 Money supply:

An increase in money supply in the country will affect the exchange rates
through causing inflation in the country. It can also affect the exchange rate
directly.
15
4.3.5 National income:
An increase in national income reflects increase in the income of the residents
of the country. The increase in the income increases the demand for goods in
the country. If there is underutilized production capacity in the country, this
would lead to increase in production. There is a change for growth in exports
too. Where the production does not increase in sympathy with income rises, it
leads to increased imports and increased supply of the currency of the country
in the foreign exchange market. The result is similar to that of inflation viz., and
decline in the value of the currency. Thus an increase in national income will
lead to an increase in investment or in the consumption, and accordingly, its
effect on the exchange rate will change.

4.3.6 Capital Movements:

There are many factors that influence movement of capital from one country to
another. Short term movement of capital may be influenced by the offer of
higher interest in a country. If interest rate in a country rises due to increase in
bank rate or otherwise, there will be a flow of short-term funds into the country
and the exchange rate of the country will rise. Reserves will happen in case of
fall in interest rates.

Bright investment climate and political stability may encourage portfolio

investment in the country. This leads to higher demand for the currency and
upward trend in its rate. Poor economic outlook may mean repatriation of the
investments leading to decreased demand and lower exchange value for the
currency of the country.

Movement of capital is also caused by external borrowings and assistance.

Large-scale external borrowings will increase the supply of foreign exchange in
the market. This will have a favorable effect on the exchange rate of the
currency of the country. When a repatriation of principal and interest starts the
rata may be adversely affected.

Other Characteristics include political factors, Psychological factors and

Speculation, Technical and Market factors.

16
 4.4 - Role of B.O.T on Money Exchange
Business in Zanzibar

The Central Government has been empowered Foreign Exchange Management

Act to make rules to carry out the provisions of the Act. Similarly empowers the
Bank of Tanzania to make regulations to carry out the provisions of the Act and
the rules made there under.

The Foreign Contribution (Regulation) Act, is to regulate the acceptance and

utilization of foreign contribution/ donation or foreign hospitality by certain
persons or associations, with a view to ensuring that Parliamentary institutions,
political associations and academic and other voluntary organizations as well as
individuals working in the important areas of national life may function in a
manner consistent with the values of a sovereign democratic republic.

4.4.1 Authorized persons:

With the Bank of Tanzania has the authority to administer foreign exchange in
Tanzania, it is recognized that it cannot do so by itself. Foreign exchange is
received or required by a large number of exports and imports in the country
spread over a vast geographical area. It would be impossible for the Bank of
Tanzania to deal with them individually. Therefore, provisions has been made
in the Act, enabling the Bank of Tanzania to authority any person to be known
as authority person to deal in the foreign exchange or foreign securities, as an
authorized dealer, money changer or off- shore banking unit or any other
manner as it deems fit.

4.4.2 Authorized dealers:

A major portion of actual dealing in foreign exchange from the customers
(importers, exporters and others receiving or making personal remittance) is
dealt with by such of the “Royal Bureau De Change” in Zanzibar, Tanzania
which have been authorized by BOT to deal in foreign exchange.

17
 4.4.3 ADMINISTRATION OF FOREIGN
EXCHANGE IN TANZANIA

FOREIGN EXCHANGE MANAGEMENT ACT

CENTRAL GOVERNMENT

BANK OF TANZANIA

AUTHORISED PERSONS

FOREIGN EXCHANGE DEALER

ASSOCIATION OF TANZANIA

AUTHORISED MONEY ATHORISED DEALERS

CHANGERS

FULL FLEDGE RESTRICTED

18
4.4.3 Authorized Money Changers:
To provide facilities for encashment of foreign currency for tourists, etc., Bank
Of Tanzania has granted limited licenses to certain established firms, hotels and
other organizations permitting them to deal in foreign currency notes, coins and
travelers’ cheques subject to directions issued to them from time to time. These
firms and organizations are called ‘Authorized Money Changers’. An
authorized money changer may be a full fledged money changer or a restricted
money changer. A full fledged money changer is authorized to undertake both
purchase and sale transactions with the public. A restricted money changer is
authorized only to purchase foreign currency notes, coins and travelers’ cheques
subject to the condition that all such collections are surrendered by him in turn
to authorized dealer in foreign exchange. The current thinking of the Bank of
Tanzania is to authorize more establishments as authorized money changers in
order to facilitate easy conversion facilities.

4.4.4 The Foreign Exchange Market:

The Foreign exchange market is the market where in which currencies are
bought and sold against each other. It is the largest market in the world. It is to
be distinguished from a financial market where currencies are borrowed and
lent. Foreign exchange market facilitates the conversion of one currency to
another for various purposes like trade, payment for services, development
projects, speculation etc. Since the number of participants in the market s has
increased over the years have become highly competitive and efficient.

With improvement in trade between countries, there was a pressing need to

have some mechanism to facilitate easy conversion of currencies. This has been
made possible by the foreign exchange markets. Considering international trade,
a country would prefer to import goods for which it does not have a competitive
advantage, while exporting goods for which it has a competitive advantage over
others.

Thus trade between countries is important for common good but nations are
separated by distance, which that there is a lot of time between placing an order
and its actual delivery. No supplier would be willing to wait until actual
delivery for receiving payments. Hence, credit is very important at every stage
of the transaction. The much needed credit servicing and conversion of the
currency is facilitated by the foreign exchange market.

Also the exchange rates are subject to wide fluctuations. There is therefore, a
constant risk associated exchange markets cover the arising out of the
19
fluctuations in exchange rates through “hedging”. Forex market is not exactly a
place and that there is no physical meeting but meeting is affected by mail or
over phone.
4.4.5 Foreign Exchange Transactions:
Foreign exchange transactions taking place in foreign exchange markets can be
broadly classified into Inter bank transactions and Merchant transactions. The
foreign exchange transactions taking place among banks are known as inter
bank transactions and the rates quoted are known as inter bank rates. The
foreign exchange transactions that take place between a bank and its customer
known as’ Merchant transactions’ and the rates quoted are known as merchant
rates.

Merchant transactions take place when as exporter approaches his bank to

convert his sale proceeds to home currency or when an importer approaches his
banker to convert domestic currency into foreign currency to pay his dues on
import or when a resident approaches his bank to convert foreign currency
received by him into home currency or vice versa. When a bank buys foreign
exchange from a customer it sells the same in the interbank market at a higher
rate and books profit. Similarly, when a bank sells foreign exchange to a
customer, it buys from the interbank market, loads its margin and thus makes a
profit in the deal.

20
 Chapter 5

DATA ANLAYSIS AND INTREPRETATION

Analysis and interpretation refers to the computation of certain measures along
with searching for the level of communication that exists between the top
management and the employees. After, collection of data coding was done for
the purpose of appropriate statistical analysis.
Analysis was done with an attempt to organize and summarizes data, in
order to enhance the efforts of outcome in such a manner that enable to relate
critical points with the study objectives.

21
We can see the most traded currencies by value is USD. That’s why for analysis
purpose we have used USD particularly in our Database.
 5.1 CURRENCY EXCHANGE BETWEEN TWO RATES

HIGHER TO LOWER

Royal Bureau De Change

PROFIT&LOSS A/C FOR THE YEAR ENDED MAY 2017
(TSH in Income and Expenses@ 60% from foreign
Particulars
millions) (In dollars)
Average If the Exchange If the Exchange
    Exchange rate rate rate
@TSH 2240 @TSH 2240 @TSH 2230
INCOME      
Net operating Income 3768.62 2261.17 2261.17 2251.07
EXPENSES        
Material consumption 0 0.00 0.00 0.00
Personal expenses 1322.59 793.55 793.55 790.01
Selling Expenses 17.82 10.69 10.69 10.64
Administrative Expenses 913.89 365.55 365.55 363.92
Capitalized Expenses 0 0.00 0.00 0.00
Cost of Sales 2831.54 1516.14 1516.14 1509.37
Others expenses 577.24 346.34 346.34 344.79
Reported PBDIT 937.08 745.03 745.03 741.70
Other recurring income 16.07   9.64 9.60
Adjusted PBDIT 953.15   754.67 751.30
Depreciation 178.21   106.93 106.45
Other write offs 0   0.00 0.00
Adjusted PBIT 774.94   647.75 644.86
Financial expenses 20.6   12.36 12.30
Adjusted PBT 754.34   635.39 632.55
Tax Charges 75.87   45.52 45.32
Adjusted PAT 678.47   589.87 584.26
Non recurring-items 423.35   254.01 587.24
Other non cash Adjustments 0   0.00 0.00
Reported PAT 1101.82   843.88 840.11

22
GRAPH: 5.1.1
 Exchange Rate fluctuation effect – Higher to lower

2500

2000

1500

Exchange rate 2240

Exchange Rate 2230
1000

500

0
Total Revenue Gross Profit

INTERPRETATION: These graphs showing total revenues are alteration

together, total revenues are decreased TSH 2261.17 million to TSH 2251.07,
and gross profit also decreased TSH 745.03 to TSH 741.7. Simultaneously all
these values are changing the net income. Though, it is very less changing but
still its affect the business net income. If the Exchange rate had fixed @ TSH
2230, the revenues would have been same.

5.2 CURRENCY EXCHANGE BETWEEN TWO RATES

23
HIGHER TO LOWER
 Royal Bureau De Change
PROFIT&LOSS A/C FOR THE YEAR ENDED MAY 2017

(TSH in
Particulars Income and Expenses@ 60% from foreign
millions)
(In US dollars)
Average If the Exchange If the Exchange
    Exchange rate rate rate
@ TSH 2240 @ TSH 2240 @ TSH 2220
INCOME      
Net operating Income 3768.62 2261.17 2261.17 2241
EXPENSES        
Material consumption 0 0.00 0.00 0.00
Manufacturing expenses 577.24 346.34 346.34 343.25
Personal expenses 1322.59 793.55 793.55 786.47
Selling Expenses 17.82 10.69 10.69 10.60
Administrative Expenses 913.89 365.55 365.55 362.29
Capitalized Expenses 0 0.00 0.00 0.00
Cost of Sales 2831.54 1516.14 1516.14 1502.60
Reported PBDIT 937.08 745.03 745.03 738.38
Other recurring income 16.07   9.64 9.55
Adjusted PBDIT 953.15   754.67 747.93
Depreciation 178.21   106.93 105.98
Other write offs 0   0.00 0.00
Adjusted PBIT 774.94   647.75 642
Financial expenses 20.6   12.36 12.25
Adjusted PBT 754.34   635.39 629.78
Tax Charges 75.87   45.52 45.11
Adjusted PAT 678.47   589.87 584.60
Non recurring-items 423.35   254.01 251.74
Other non cash Adjustments 0   0.00 0.00
Reported PAT 1101.82   843.88 836.35

24
GRAPH: 5.2.1
 Exchange Rate fluctuation effect – Higher to lower

2500

2000

1500

Exchange rate 2240

Exchange Rate 2220
1000

500

0
Total Revenue Gross Profit

INTERPRETATION: These graphs showing total revenues are alteration

together, total revenues are decreased TSH 2261.17 million to TSH 2241, and
gross profit also decreased TSH 745.03 to TSH 738.38. Simultaneously all these
values are changing the net income. If the Exchange rate had fixed @ TSH
2240, the revenues would have been same.

5.3 CURRENCY EXCHANGE BETWEEN TWO RATES 25

LOWER TO HIGHER
 Royal Bureau De Change
PROFIT&LOSS A/C FOR THE YEAR ENDED MAY 2017

(TSH in
Particulars Income and Expenses@ 60% from foreign
millions)
(In dollars)
Average If the Exchange If the
    Exchange rate rate Exchange rate
@ TSH 2240 @ TSH 2240 @ TSH 2250
INCOME      

Net operating Income 3768.62 2261.17 2261.17 2271.26

EXPENSES        
Material consumption 0 0.00 0.00 0.00
Manufacturing expenses 577.24 346.34 346.34 347.89
Personal expenses 1322.59 793.55 793.55 797.09
Selling Expenses 17.82 10.69 10.69 10.73
Administrative Expenses 913.89 365.55 365.55 367.18
Capitalized Expenses 0 0.00 0.00 0.00
Cost of Sales 2831.54 1516.14 1516.14 1522.91
Reported PBDIT 937.08 745.03 745.03 748.36
Other recurring income 16.07   9.64 9.68
Adjusted PBDIT 953.15   754.67 758.04
Depreciation 178.21   106.93 107.41
Other write offs 0   0.00 0.00
Adjusted PBIT 774.94   647.75 650.64
Financial expenses 20.6   12.36 12.42
Adjusted PBT 754.34   635.39 638.23
Tax Charges 75.87   45.52 45.72
Adjusted PAT 678.47   589.87 592.50
Non recurring-items 423.35   254.01 255.14
Other non cash Adjustments 0   0.00 0.00
Reported PAT 1101.82   843.88 847.65

GRAPH: 5.3.1 26
 Exchange Rate fluctuation effect – Lower to Higher

2500

2000

1500

Exchange rate 2240

Exchange Rate 2250
1000

500

0
Total Revenue Gross Profit

INTERPRETATION: These graphs showing total revenues are alteration

together, total revenues are increased TSH 2261.17 million to TSH 2271.26,
and gross profit also increased TSH 745.03 to TSH 748.36. Simultaneously all
these values are changing the net income. If the Exchange rate had fixed @ TSh
2240, the revenues would have been same.

5.4 CURRENCY EXCHANGE BETWEEN TWO RATES

27
LOWER TO HIGHER
 Royal Bureau De Change
PROFIT&LOSS A/C FOR THE YEAR ENDED JUNE 2007

(TSH in
Particulars Income and Expenses@ 60% from foreign
millions)
(In dollars)
Average If the Exchange If the
    Exchange rate rate Exchange rate
@ TSH 2240 @ TSH 2240 @ TSH 2260
INCOME      

Net operating Income 3768.62 2261.17 2261.17 2281.36

EXPENSES        
Material consumption 0 0.00 0.00 0.00
Manufacturing expenses 577.24 346.34 346.34 349.43
Personal expenses 1322.59 793.55 793.55 800.64
Selling Expenses 17.82 10.69 10.69 10.79
Administrative Expenses 913.89 365.55 365.55 368.81
Capitalized Expenses 0 0.00 0.00 0.00
Cost of Sales 2831.54 1516.14 1516.14 1529.68
Reported PBDIT 937.08 745.03 745.03 751.68
Other recurring income 16.07   9.64 9.73
Adjusted PBDIT 953.15   754.67 761.41
Depreciation 178.21   106.93 107.88
Other write offs 0   0.00 0.00
Adjusted PBIT 774.94   647.75 653.53
Financial expenses 20.6   12.36 12.47
Adjusted PBT 754.34   635.39 641.06
Tax Charges 75.87   45.52 45.93
Adjusted PAT 678.47   589.87 595.14
Non recurring-items 423.35   254.01 256.28
Other non cash Adjustments 0   0.00 0.00
Reported PAT 1101.82   843.88 851.42

GRAPH: 5.4.1
Exchange Rate fluctuation effect – Lower to Higher
28
 2500

2000

1500

Exchange rate 2240

Exchange Rate 2260
1000

500

0
Total Revenue Gross Profit

INTERPRETATION: These graphs showing total revenues are alteration

together, total revenues are increased TSH 2261.17 million to TSH 2281.36,
and gross profit also increased TSH 745.03 to TSH 751.68. Simultaneously all
these values are changing the net income. If the Exchange rate had fixed @
TSH 2240, the revenues would have been same.

5.5 TANZANIAN SHILLING - US DOLLAR EXCHANGE RATES

OVER THE LAST FIVE YEARS

29
YEAR RATES
2013 – December 1582
2014 – December 1733
 2015 – December 2158.5
2016 – December 2177.5
2017 – June 2238

RATE
2500

2000

1500
RATE

1000

500

0
2013 2014 2015 2016 2017

INTERPRETATION: The graph is showing that the exchange rate of TSH

against USD is continuously increasing (The economy value of TSH is going
down against USD) over the last 5 years. It reflects that the money exchange
business will do good business if they hold foreign currency for a certain period
and sale in the market.

Chapter 6

6.1 Findings of the study 30

The foreign exchange market (forex or FX for short) is one of the most exciting,
fast-paced markets around. Until recently, forex trading in the currency market
had been the domain of large financial institutions, corporations, central banks,
hedge funds and extremely wealthy individuals. The emergence of the internet
has changed all of this, and now it is possible for average investors to buy and
sell currencies easily with the click of a mouse through online brokerage
accounts.

The hardest part was convincing a bank to provide us with foreign exchange at a
wholesale rate so we could offer customers a good deal. Royal Bureau De
Change had to convince a finance provider that we were the real deal and could
benefit it, despite the fact we were a startup with no reputation in the market.

But the service Royal Bureau De Change offered was a win-win and not a
threat to the bank’s business. We knew large banks don’t want to have to
manage lots of small transactions, so it made sense for us to handle all the
admin of these trades. Then they would just deal with us as one big customer.

Last year Royal Bureau De Change grew 75% and turned over about TSH
1.3bn. That equates to about 9.1m of revenue going into the business. Royal
Bureau De Change employ 10 more people and are set to grow our turnover by
70%-80% again this year. Growth has been fast and Royal Bureau De Change
are well placed to continue that in the future.

6.2 SUGGESTIONS

Royal Bureau De Change had low overheads compared with the average bank, 31
which obviously forked out for multiple premises, staff, utilities and other costs.
So Royal Bureau De Change could work on a low-margin, high-volume
model, making lots of trades and taking a tiny slice of money each time. It’s a
volume-driven business. The benefit was passed onto consumers in a better
exchange rate.

Royal Bureau De Change created a series of affiliate partnerships with

companies that used foreign exchange. Take, for example, an estate agent in
Spain selling holiday properties to Brits: their customers would pay for
properties in euros and so would need to convert the money from pounds before
paying. If the customer could do that cheaply, given that they would be
converting a large amount of money, that would be a major benefit to both the
estate agent, who could offer the service as a value-add, and the customer who
would save money.

Being cheaper than our rivals was obviously important. We were so lean that we
could keep our margins wafer-thin. But also we could give better
communication about when the money would be arriving.
After the initial set-up phase, word of mouth became a big factor in the way our
business grew. Even now, about 60% of our business comes from
recommendations.

Be prepared to take risks. Its part of what it takes to become successful, so you
must commit and persevere. Don’t wait too long for the perfect opportunity to
start your business, however, because you could be waiting forever.

When a good opportunity comes your way grabs it with both hands. Don’t
worry about being perfectly prepared because you’ll learn a lot along the way.

 Assess the likelihood of big changes in currency values. The better that a
country is doing economically, the more likely it is that its currency will
remain stable or increase in value relative to other counties.
 Factors like interest rates, inflation rates, public debt, and political
stability can all affect the value of a currency.
 Changes in economic factors like the country’s Consumer Price Index
and Purchasing Managers Index can indicate that a currency’s value is
about to change. 
 Recognize the risks: Buying and selling foreign currency is a fraught
prospect, even for expert investors. Many investors use leverage, the
practice of borrowing money to help them buy more currency. For
example, if you wanted to trade $10,000 of currency, you would probably
borrow at a leverage rate of 200:1. You could deposit as little as $100
32
into your margin account. However, if a trade goes sour, you may end up
not only losing your own money but owing your broker a great deal more
than you might on stock or futures trades.
 6.3 LIMITATIONS

 The analysis of this study is mainly done on the income statements.

 This study is limited for the year 2016-2017.
33
 It does not take into consideration all Tanzanian companies involving in
money exchange business.
 The exchange rates are taken averagely.
  The information collected from various websites is assumed to be
accurate and true.
 Time constraint.
 Resource constraint.
 Bias on the part of interviewers.

Chapter 7

CONCLUSION
34
The survey I have carried out on Impact of currency market in Zanzibar. The
conclusion of the survey is as follows.
The awareness of the forex market in Zanzibar is very high in compare to other
financial instruments. Most of the people are related to the currency trading. As
the gender wise male investors are more investing than women investors. But
the education level is as well a positive sign of women also taking interest in
forex market. The equity and commodity investors are as well investing in
currency. In Zanzibar USD, EURO, GBP, and JPY are the currencies been
traded most.

Daily currency fluctuations are usually very small. Most currency pairs move
less than one cent per day, representing a less than 1% change in the value of
the currency. This makes foreign exchange one of the least volatile financial
markets around. Therefore, many currency speculators rely on the availability of
enormous leverage to increase the value of potential movements.

Thus, the trick to running an effective money exchange business is making a

strong plan and executing and implementing the business processes in
accordance to that.
Effective and efficient currency exchange is a very lucrative business
opportunity that can yield huge returns if executed with a strong profit motive
and a constant eye on future trends to maximize once exposure in profitable
ventures.
Also, do not bother about exchange rates too much. Play it by the ear and take
on opportunity as it comes. At the same time always be alert about
the events globally and how they could potentially impact your business. This
will not just help you boosting profit but also give you a considerable leverage
in case the forex market sees some unfavorable developments.

Chapter 8
BIBLIOGRAPHY

35
Books:
 1. International financial management-Prasanna Chandra
2. Foreign Exchange Arithmetic-M.jeevanandam
3. Grinblatt M. & Titman S., Financial Markets and Corporate Strategy,
Tata McGraw-Hill, 2nd Edition, 2003

Websites:

 Google Search
 www.economictimes.com
 www.forbes.com

News Papers
The Economic Times
Business Line

36