Kenya stands to benefit from backing diaspora plans for investment saccos

I recently heard Simon Nyagah, vice chair of the Kenya-USA Diaspora Sacco, talk to a small gathering of government and private sector leaders about ways in which the Kenyans abroad can become much better organised and supported in contributing to the development of our economy, and I thought it would be good to share his proposals more broadly.

He spoke about the desire of the Kenyan diaspora to strengthen the government’s economic growth agenda, largely through the formation of the diaspora saccos that are being registered across the world.

What’s still missing though, he and his colleagues have seen, are policies, structures and programmes that can fully utilise the resources that can flow through these vehicles for the benefit of both the country and its diaspora community.

The proposed Diaspora Investment Programme is, therefore, about fostering a savings culture among Kenyans in the diaspora, while helping them to participate in the development of their motherland in a consolidated and effective way.

Diaspora investment programmes date back to the 1930s, when they were instigated by Japan and China. Other successful examples include Israel, which raised $853 million in 2015 and close to $25 billion from such sources in the last 30 years; and India, whose diaspora contributed $68.9 billion in 2015.

The Greek diaspora raised $428 million in 2015, and at its highest raised around $3 billion, cushioning the country against the prevailing harsh economic conditions.

As for the Philippines, its remittances reached $29 billion in 2015, and its Filipino Overseas Workers Act of 1995 set a platform for its diaspora investment programme.

Closer to home Ethiopia has issued two tranches of a diaspora bond — despite them lacking a credit rating.

What about Kenya? In 2016 remittances increased by 10 per cent to $1.66 billion (Sh173 billion), from $1.56 billion in 2015.

Kenyans living in the United States and Canada accounted for almost half of the inflows, those from Europe for 29.1 per cent, and those from the rest of the world 22.8 per cent.

Kenyans abroad are found in countries generally rich in resources, with exceptional educational and research opportunities, and good living and earning conditions. But they face challenges in investing their savings back home in ways that maintain control and accountability.

It has been hard for them to verify the progress of projects, and indeed they have lost out to too many con artists posing as professionals, invested in land and property assets whose titles were questionable, suffered punitive exchange rates and seen their funds diverted to uses other than the intended ones.

This was the main driving force for them to come together and form the diaspora saccos.

We also heard about how the government can better utilise the diaspora community to promote Kenyan products and services in their countries of residence.

Such Kenyans can act as ambassadors for Brand Kenya — market Kenyan products such as cut flowers, coffee, tea and various services; offer a platform through which other global organisations can work with Kenyans; enhance government resource mobilisation; promote a saving culture among the diaspora; enhance Kenya’s currency stability through increased foreign currency flows into the country, improving balance of payments; improve Kenya’s allure as a global trading partner; act as a platform for knowledge and technology transfer; enhance Kenya’s development as a regional manufacturing hub, creating jobs and hence reducing the risks of insecurity; launch a platform for a global youth apprenticeships exchange programme and generally create a solid platform for the socio-economic inclusion of the diaspora in alignment with Vision 2030.

In order to harness the opportunity provided by the diaspora community, Mr Nyagah suggested that the Ministry of Foreign Affairs should allow for the establishment of a resource and information centre at Kenyan embassies.

The Ministry of Co-operatives should continue facilitating the registration of more saccos in the diaspora so they can support government investment programmes.

And the Ministry of Finance should oversee the safe remittance of funds into the banking system and their onward legitimate investment. These ministries should be active in spreading a powerful aligned message to the diaspora.

To enable all this, the formation of a Kenya Diaspora Business and Investment Authority is proposed, providing a framework for nurturing the Diaspora Investment Programme through the structuring of saccos as vehicles for remittances, and thus reaping maximum benefits for government and other programmes, as well as good returns to members.

In 2012, the representatives of diaspora Kenyans in the US and the ministries of Industrialisation and Cooperatives worked together to create the platform for the registration and operation of the Kenya-USA Diaspora Sacco and the UK Diaspora Sacco, and several others have since been formed.

They saw that the benefits of the sacco approach were that it would have no expiry time; that it would be easy to sell to the diaspora as a means of stimulating savings and investment; and that it could be sector specific, with the possibility of different sectors being selected each year.

There would be a constant flow of resources on which the government could rely, and the money would remain in Kenya since the funds would be re-invested after maturity.

Mr Nyagah confirmed the existence of a patriotic and committed constituency of diaspora Kenyans across the globe. He stated that the only additional needs for a successful Diaspora Investment Programme are for the proposed authority to run the programme, and for government to support it.

He and his colleagues are ready to launch and market the inaugural Diaspora Investment Programme on behalf of the government, noting that if well nurtured it can finance investments of as much as a trillion shillings annually.

Finally, in this day and age when overall international recorded remittances are about three times the amount of official aid and are almost as significant as the flows of foreign investment to developing countries, surely Kenya more than almost anywhere else should be taking maximum advantage of this golden opportunity.

If you wish to learn more about it, contact Simon Nyagah at [email protected].

The writer is a founder and director of several companies. [email protected]