KCB eyes diaspora cash with investment scheme

KCB Group seeks to attract diaspora cash through an online investment scheme that is targeting remittances from East Africans living abroad.

The investment plan, which will be Internet- and mobile phone-driven, will facilitate KCB customers’ investment in real estate, listed shares and government securities.

Remittances from the diaspora have been on an upward curve, with a World Bank report of December last year indicating that developing countries received over $350 billion in 2011.

Kenya is receiving an estimated Sh67 billion ($800 million) of this amount, followed closely by Uganda which got more than $649 million.

“Over the years, we have witnessed the growth of this diaspora market that now stands at over 12 million people in the region alone and established a great need for a reliable product to suit the dynamic needs of this market segment,” said the KCB Group CEO Martin Oduor-Otieno at Monday’s launch.

Central Bank of Kenya has attributed the rise in these remittances to increased use of formal channels and lower transaction fees as a result of growing competition among money transfer service providers.

High cost of funds in the local market saw KCB’s interest expenses rise to Sh2.5 billion from Sh397 million in the first three months of the year.

Most of these remittances are used mainly for investment, payment for education, family maintenance, building and construction of houses as well as for savings, said Mr Oduor-Otieno.

Many people in the diaspora have lost huge sums of money to their relatives and friends whom they had entrusted to invest on their behalf, especially in the real estate sector.

Custodial business

To deposit money into an account, an individual will choose on whether to use SWIFT system that involves transfer among correspondent banks.

The transfer usually takes 48 hours, with the person receiving the cash charged Sh600 above what the sender is charged by the remitting bank. One can also write a cheque in favour of the account, which will take 12 working days to clear.

Investment in listed shares will be facilitated through the banks’ custodial business, which uses listed stockbrokers to execute customers’ instructions.

KCB is also operating in Uganda, Rwanda, Tanzania, South Sudan and Burundi and will, therefore, receive the funds in different currency denominations.