Markets & Finance

Global recovery lifts diaspora remittances

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Economic recovery has boosted remittances by the Kenyan diaspora by 37 per cent in March compared to the same month last year. Photo/FILE

Improving global economic conditions lifted remittances by the Kenyan diaspora by 37 per cent in March compared to the same month last year.

Kenyans working abroad sent home Sh6 billion in March ($71.58 million) compared to Sh4.4 billion ($52.68 million) in March 2010, Central Bank of Kenya (CBK) data showed.

The figures show remittances increased 18 per cent in March compared to February this year, when Sh5.2 billion ($60.76 million) was sent.

First quarter

Total remittances for the first quarter of the year also went up 37 per cent to Sh16.7 billion compared to the first three months of 2010.

“The performance reflects continued economic recovery in source markets,” said the CBK director of research Charles Koori. “The source markets for remittances have on average maintained the same shares with North America contributing 53 per cent and Europe 27 per cent of total remittances,” added Mr Koori.

The US, which is the largest source of remittances and buys about Sh20 billion worth of Kenyan goods, has seen its manufacturing sector lead the economic recovery having raised production by 0.8 per cent in March this year.

Analysts have forecast as much as 3.5 per cent economic growth in 2011 in the US and a global growth of about four per cent.

Western Europe, which is also a key destination of over a quarter of Kenyan exports, has shown signs of recovery with the European Central Bank President Jean-Claude Trichet saying on Sunday the euro-area economy is exceeding expectations.

Germany and France, seen as the engines of Europe’s economic recovery, grew by 1.5 per cent and 1.0 per cent exceeding economists’ median expectations of 0.9 and 0.6 per cent, respectively for the first quarter of the year.

News report showed that Germany, Europe’s largest economy, is forecast to grow 2.6 per cent this year.

At the end of the quarter, press reports said it grew 5.2 per cent year-on-year — the highest growth since its reunification some two decades ago.

Remittances to relatives and friends are ordinarily used for investments in the stock market, real estate, education and food for households, according to a 2010 World Bank study.

Investments took 24.2 per cent of all remittances from outside Africa, which constitute the lion’s share of the total, while food took 12.8 per cent and real estate took 11.2 per cent.

Stock brokers and bankers have stepped up marketing of their services in the diaspora trying to convince Kenyans to invest in the capital markets.

The Kenya Association of Stockbrokers and Investment Banks (KASIB) said it had been involved in initiatives to have the diaspora invest back home for several years.

“We have worked with the ministry of foreign affairs, Brand Kenya and Kenya Overseas Business Alliance to show our fellow citizens where to invest their money. We have talked to societies and group of investors abroad on investing,” said Willie Njoroge, acting CEO of KASIB.

He said the organisation kept the diaspora groups abroad informed of domestic developments including about any new investment products or offers being introduced back at home.

He cited the case of the infrastructure bonds which started in January 2009 as one case where the diaspora participated.

“With a weaker shilling as is the case now, the diaspora is keen on investing here because the returns are more attractive,” said Mr Njoroge.

The local unit has lost more than Sh20 between mid 2008 and this year amounting to a 35 per cent depreciation against the dollar.

For those holding dollars, it had become cheaper to invest as they can now obtain more shillings for every dollar’s worth.

Besides Western Union, some of the leading institutions through which money is transferred to Kenyans from abroad include Equity, Barclays and KCB banks.

Kenyan bank managers have recently said they are intensifying their ties with money transfer service providers with a view to tapping into the soaring cash remittances to bolster commission incomes and deposits.

The banks also pocket foreign exchange gains from the transfer services.

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