The thriving relationship between inward remittances and a country’s financial development should be obvious. Kenya, one of the most developed countries in East Africa, is proof that remittances made by expats can positively impact economic growth.
To give you an example, Kisii, a county in south-western Kenya, has experienced a drastic transformation in recent years. And this transformation can be attributed to the millions of shillings invested by Kenyan expats around the world. In the last few years, they have invested in residential and commercial properties, schools, hospitals, and hotels, thereby making Kisii one of Kenya’s fastest-growing counties.
One can witness this trend of growing remittance inflow across Kenya. According to a report released in 2018, the Central Bank of Kenya (CBK) stated that Kenyans working and living abroad were sending home four times more money than they did a decade earlier.
Further in January 2019, Central Bank of Kenya reports revealed that cash inflow had grown by 39.5% in the past year. Industry reports suggest that from January to October 2018 Kenyans in the US sent money to Kenya that amounted to nearly $2.61 billion, while those working in Europe sent around $712 million. Money sent to Kenya from other countries amounted to $346.8 million. A massive increase of 42.48% of total remittances received in 10 months was closed at $2.23 billion as compared to remittances received in 2017. Experts believe these numbers could be even higher, as the current figures only account for remittances sent through legal channels like banks and authorised money transfer operators such as Xpress Money. Since 2015, remittances continue to be the country’s biggest source of foreign exchange.
While the numbers seem phenomenal, they tell a bigger story of how Kenyans living abroad remit money to their home country and contribute to its overall economy and progress.
As per estimates, three-fourths of the remittances sent by Kenyan expats go into fulfilling family obligations and charity. Family obligations include food, healthcare, education, and other living expenses. Each year, $288 million is funnelled towards education; this has helped hundreds of Kenyan families to combat spiralling fees and other educational challenges. Eventually, the money spent by families that receive remittances is funnelled into the country’s economy. Today, economic development in Kenya includes generating more jobs, building infrastructure such as roads and bridges, and improving the overall standard of life. The rapid increase of mobile money in Kenya has significantly contributed towards uplifting households from extreme poverty. It has also enabled women to move away from farming practices and take up more business-oriented occupations. From the total remittance inflow a sizeable portion is also directed towards investments or savings. Combating a sinking economy, Kenya in its own way has exemplified how these remittances, do more than just sustain households – they help uplift the country as a whole. Indeed, inbound remittances are a key enabler in the country’s economic growth.
The most popular investment option for Kenyan expats is real estate. This has proved to be a fruitful avenue. In the case of Kisii, the Kenyan diaspora has pumped in millions of shillings in real estate thereby transforming it into one of the most rapidly developing areas in the country. However, after understanding the financial goals of the Kenyan diaspora, banks in Kenya are developing various investment instruments – such as mortgages that aim to turn expat remittances into wealth.
The increase in remittance inflow provides a huge opportunity for the Kenyan government and the country’s financial services industry to develop an environment that is conducive for the growth of the economy. Bringing down the cost of remittances and developing more convenient ways of money transfer are also imperative to the cause.
Transfer charges to Kenya, as with other African countries, are still quite high. Although the rising adoption of cheaper mobile money services such as Safaricom’s M-Pesa has helped lower costs, a lot remains to be done. Xpress Money strives to make remittances to Kenya economical and convenient by fostering meaningful partnerships with some of Kenya’s most trusted banks and financial institutions. Using Xpress Money, Kenyan expats around the world can send money home within minutes and in various ways. Their loved ones can collect the remittances either as cash from across 700 locations within the country or through account credit in any Kenyan bank, or by using an M-Pesa wallet.
As the country closes in on its Kenya Vision 2030, the government is relying heavily on its expat population for investment. The development program focuses on matters like curbing the high cost of remittances, addressing diaspora issues, using mobile money to boost tourism, reversing brain drain, and creating a comprehensive data file on Kenyan diaspora profiles.
Money sent back to Kenya is steering the economy to drive investment in different core sectors such as financial services, BPO, tourism, and education. The emergence of mobile technology is reducing the cost of international transfers by offering a safer and more comfortable approach. The Kenyan government is taking proactive steps to streamline the process. It is also taking steps to offer tax rebates and offer incentives on investments made by expats.
Remittances, if utilised wisely, have the potential to radically transform a country’s economy and Kenya is well aware about this fact. Despite being a relatively low-income country, appropriate utilisation of remittance money has shown a huge potential for growth to other nations. With a growing sense of confidence in the country’s investment landscape, the coming years could see a further rise in inward remittances. Remittances can be considered a significant contribution to a country’s GDP. This external financial source can help bail out developing nations in times of distress and shape a future that’s characterised by sustainable development.