Remittances to Kenya dip 3 per cent

Remittances from Kenyans working abroad in July dipped by 3.4 per cent, a move that could slow down the prospects of money transfer service companies that were banking on improved inflow to grow their income.

Remittance transfers in July 2010 were $50.7 million (Sh4.09 billion), down from the $52.5 million (Sh4.1 billion) in June 2010.

Latest statistics from Central Bank of Kenya (CBK) indicate that international remittance had reached $46.3 million by June 2010, a move that saw an increase in investment in the money transfer services.

Mr Charles Gitari Koori, director Research Department, however said that the remittances in July 2010 continue to track the average of $50 million (Sh4.09 billion) per month since January 2008.

“The source markets for remittances have on average maintained the same shares with North America contributing 55 per cent and Europe 27 per cent of the total remittances to Kenya in July 2010,” said Mr Koori, in the latest CBK monthly update.

The country has seen a flush of investments in the money transfer services that saw the entry of the Ushindi mobile money (UMM) service last month.

Safaricom has also been actively marketing its MPESA service in a bid to tap into this market previously dominated by the traditional MoneyGram and Western Union money transfer services.

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

“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.

Mr Koori is upbeat that Kenya will see an upward growth in remittances, a move that is likely to boost investment at the stock market and in the real estate sector.

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.

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 remittance— 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 $1 billion 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.