Kenyan firms and investors are increasingly looking beyond local borders, with new data showing that investments abroad surged by 37 percent in the past year, with Uganda, Ethiopia and Tanzania emerging as the top destinations.

The sharp rise underscores the growing appetite of Kenyan businesses to expand regionally, seeking better opportunities, larger markets and more favorable business environments.

Uganda continues to attract the highest share of Kenyan capital, buoyed by its strong trade links and geographical proximity. Nairobi and Kampala maintain one of the most vibrant bilateral trade relationships in East Africa, and many Kenyan companies have found Uganda’s regulatory and consumer environment conducive for expansion.

Ethiopia follows closely, with its large population and ongoing economic reforms positioning it as a promising hub for foreign capital despite challenges in policy consistency.

Tanzania also remains a preferred investment ground, supported by infrastructure growth, a relatively stable political climate and the deepening of regional integration.

The surge in external investment is also being linked to pressures within Kenya’s domestic economy. Rising costs of doing business, high interest rates and persistent tax demands have made some local firms consider diversifying their operations into neighboring countries.

By expanding regionally, many enterprises are not only tapping new revenue streams but also hedging against local market volatility.

Sectors attracting the most cross-border investment include financial services, manufacturing, retail trade and construction. Kenyan banks have widened their footprint across the region, while retail chains and manufacturing firms are scaling up to serve growing populations in East Africa. The trend is further supported by regional trade agreements under the East African Community, which continue to ease cross-border transactions and investments.

Analysts note that while the rise in foreign investment is a positive sign of regional integration, it also signals structural weaknesses in Kenya’s domestic environment that must be addressed to retain capital.

If unchecked, more firms could prefer expanding abroad at the expense of investing locally, limiting job creation and slowing domestic growth.