Kenyans increase remittances from diaspora

Remittances from Kenyans working abroad rose 15 per cent to $52 million (Sh4.1 billion) in June compared to the same month last year, boosting the shilling and domestic demand in an economy that is witnessing sluggish retail numbers.

Kenyans sent a total of $300.2 million (Sh24 billion) in the six months to June from $291.8 million (Sh23.3 billion) in the same period a year earlier, says Central Bank of Kenya (CBK).

“Remittances through June continue to track the long run average of $50 million per month,” Charles Gitari Koori, Central Bank of Kenya’s director of research, said in a monthly report.

Source markets

“The source markets for remittances have on average maintained the same shares with North America contributing 58 per cent and Europe 26 per cent of total remittances to Kenya in June 2010.”

The bulk of the money goes into household expenditure and supporting investments such as shares and real estate.

Currency dealers reckon that the increased flow will help support the shilling.

“Kenyans in the diaspora are able to borrow at lower rates in the countries they reside in for investing locally to earn higher returns,” said Mr Ken Butiko, a dealer at the Bank of Africa, adding the foreign currency could help shore up the value on increased supply.

Investment at the stock market and in the real estate sector is also likely to get a lift, while Kenyans who rely on remittances from their relatives and friends abroad to finance consumption could also get relief—offering new demand to retailers complaining of sluggish business.

A recent survey by consumer market research firm TNS Research International found that despite businessmen being optimistic of a swift recovery of the economy they continued to face flat sales.

Diaspora remittances have grown steadily over the last five years, providing at lifeline for thousands of Kenyans with relatives working abroad, while also adding fuel to the stock market and real estate.

Last year, CBK put the total remittance estimates at $609.2 million (about Sh48.7 billion) down from a record $611.2 million (Sh48.8 billion) the previous year.

But this year’s receipts are expected to surpass last year’s owing to the economic recovery of the US economy and stabilisation of the weak European economy — the major source of the remittances— which has suffered massive job losses in 2009 following the global economic meltdown that started the third quarter of 2008.

World Bank estimates put total remittances that come through the banking system and unofficial channels such as personal deliveries at over one billion dollars per annum.

Tea, horticulture and tourism are Kenya’s other chief foreign exchange earners. Supplies from these sectors are also expected to increase this year, save for horticulture.