Uhuru: Use technology to reduce cost of sending money
What you need to know:
- President asks banks to find cheap means for the diaspora to send cash home.
Kenya is looking to technology to bring down the cost of sending money from the Diaspora and attract more foreign exchange at a time when inflows from tourism and cash crops are flagging.
President Uhuru Kenyatta, speaking in Doha, Qatar on Wednesday, said that the government was negotiating with financial institutions to make money transfer to Kenya easier and less costly.
“The technology is available. What we need is to ensure that our banks are able to work with banks resident in the countries where Kenyans are employed to see how they can send their money home at the least possible expense,” the President said.
A report by the UK’s Overseas Development Institute released this month shows that many of the benefits of remittance transfers are lost in intermediation as a result of high charges.
“Africa’s diaspora pays 12 per cent to send $200 (Sh17,200) almost double the global average. Reducing charges to world average levels and the five per cent G8 target would increase transfers by $1.8 billion (Sh155 billion) annually,” says ODI in the report titled: Lost in Intermediation: How Excessive Charges Undermine the Benefits of Remittances for Africa.
The report further says that major barriers to cost-reduction include an international market controlled by Western Union and MoneyGram which is reinforced by financial regulation in favour of a small number of banks as agents.
According to Central Bank of Kenya data, remittances from Kenyans living abroad stood at Sh112 billion ($1.29 billion) in 2013, and in the first two months of 2014 a total of Sh19.1 billion ($221 million) was remitted.
In February, North America accounted for 48.6 per cent of total inflows, with Europe accounting for 27.7 per cent and the rest of the world 23.8 per cent.
Traditionally, Kenyans in the diaspora have relied on formal channels such as Western Union, MoneyGram and Xpress Money to send cash home, with the World Bank estimating that these channels handle about 64 per cent of remittances to Africa.
About 17 per cent of the remittances are channelled through commercial banks, while foreign exchange bureaus, postal money orders and personal deliveries were used to send the remaining portion.
The shift in focus to technology is likely to involve wider use of mobile money transfer for remittances, bypassing the more traditional avenues.
Safaricom recently signed a deal that will allow MoneyGram users in about 200 countries to send money directly to M-Pesa customers.
In response to the reducing forex inflows from tourism, Mr Kenyatta urged players in the industry to diversify their product portfolio, targeting conference tourism in addition to the traditional beach and safari tours.
Leading Qatari hotel operator Katara Hospitality through its chief operations officer Christopher Knable expressed interest in investing in the Kenyan hospitality industry with priority on conference facilities.
President Kenyatta also announced the government would crack down on unscrupulous employment agents who exploit Kenyans working abroad.
Other than subjecting some workers to deplorable working conditions and low pay, the unscrupulous agents and employers withhold payments due to the workers, cutting off potential remittances to Kenya.
