Kenyans working and living abroad are now sending home four times more cash than a decade earlier, official statistics show, underlining their importance in growing national wealth.
Nearly Sh260.23 billion ($2.55 billion) was remitted by the diaspora community in 12 months through last August compared to Sh63.42 billion in the same period in 2008, latest data by the Central Bank of Kenya (CBK) indicates.
That’s a 41.9 per cent growth compared to (Sh183.38 billion) remitted within 12 months through August 2017.
The remittances have been the country’s largest source of foreign exchange (international currencies) since 2015 when they overtook earnings from tea exports.
Other key sources of foreign exchange include tourism receipts as well as horticulture and coffee exports.
Between January and August this year, inflows from Kenyans in foreign countries grew by half or Sh61.55 billion to hit Sh184.65 billion compared to Sh123.10 billion remitted in the same period in 2017.
That translates to a monthly average of Sh23.08 billion in that period compared to Sh15.39 billion last year.
Cash sent home by the diaspora community in the first eight months of the year was equivalent to 98.07 per cent of the Sh188.28 billion which Kenya earned from exportation of tea (Sh96.23 billion), horticulture (73.94 billion) and coffee (Sh18.11 billion) in that period.
The diaspora inflows are estimated to be much higher than the official statistics which are based on what is remitted through official channels, largely commercial banks and other authorised international remittances service providers such as Western Union and MoneyGram.
“I believe it's massively undercounted and could be double what’s captured by the Central Bank of Kenya and rising,” chief executive of investment advisory Rich Management Group, Aly-Shan Satchu, said earlier in the year.
“Remittances are indeed a wonderful ''silver bullet'' relatively recent phenomena. Our inward remittances have been accelerating to fresh all-time highs and speaks fundamentally to Kenya’s intellectual capital and monetisation thereof.”
The country’s diaspora community has become a major economic player especially in construction sector, despite high transaction charges of about 10 per cent of the value being remitted.
The rising penetration of cheaper mobile money services such as Safaricom’s M-Pesa has seen most of the Kenyans in foreign countries adopt such platforms to send cash home.
“Recent data has shown that Kenyans are our biggest senders of remittances to mobile money accounts globally. Now, more than 90 per cent (91 per cent to be precise) of our transactions in Kenya go to mobile money accounts,” London-based online money transfer service WorldRemit said via email.
An estimated three-quarters of Kenya’s diaspora remittances, however, go to charities and family support obligations such as school fees and medical bills.
Kenya Diaspora Alliance (KDA) chairman Shem Ochuodho maintains that could be reversed in favour of investments if citizens abroad were offered incentives such as tax rebates to invest back home.
The trust, which says it represents 44 associations in different countries and organises the annual diaspora homecoming convention, says cash sent home by the diaspora for investments should be treated as Foreign Direct Investments (FDIs).
“If you want milk from a cow, you first fatten it,” Dr Ochuodho said ahead of this year’s three-day diaspora convention from December 19 in Nairobi.
“We will not be focusing on creating awareness on national investment opportunities alone, but also projects in the counties. There’s no reason why the diaspora cannot match the levels we have seen in countries such as Philippines who do almost similar jobs as Kenyans yet their annual remittances is about Sh4.08 trillion.”
“Kenya’s diaspora inflows could rise to Sh408.2 billion-Sh510.25 billion annually on investment incentives and protection,” he added.
Financial services firms, particularly commercial banks, have in recent years developed savings and investment products such as mortgages targeted at the diaspora who have historically favoured real estate.
Top banks such as Kenya Commercial Bank (KCB) Group, Equity, Co-operative, and Diamond Trust Bank have been busy opening diaspora windows to tap payments from Kenyans working and living abroad and inking global partnerships with money remittances firms.
The most popular investment for diaspora clients is real estate. Most of them prefer to purchase residential homes or land.
Head of Diaspora unit at KCB Group Vincent Moturi said real estate remains the most popular asset class among the Kenyans living abroad, with majority sinking cash in residential homes or land.
“The reason why is because they feel owning real estate is a source of building wealth and also the return on investment has been very good in the recent past,” Mr Moturi said.
“Marketing of investments opportunities by banks like KCB has given the diaspora the incentive for them to invest. We provide a secure way for them to engage in growing their wealth. This in turn helps increase remittances for the specific purpose of investing.”