Money sent home jumps 11pc as rest of world slows

Kenya continues to see big increases in money sent home from around the world despite a downturn that has dampened remittances globally.

According to new World Bank figures released this week, the growth of remittances to Kenya hit 10.7 per cent last year, well above the global average increase of about six per cent.

Only South Africa (7.1 per cent) and Uganda (6.8 per cent) saw similar high levels of increases, with Nigeria — which accounts for around two-thirds of Africa’s total remittance inflows — recording no growth.

Sub-Saharan Africa is projected to see growth slow to 0.9 per cent in 2015, leading to total remittances of $33 billion (Sh3 trillion).

But continuing growth in its economy means that Kenya is expected to buck the trend for inflows and continue to grow this year.

Remittance flows to the region are expected to pick up to $34 billion in 2016 and $36 billion in 2017.

World-wide growth in remittances is projected to “slow sharply this year due to weak economic growth in Europe,” deterioration of the Russian economy and the depreciation of the euro and ruble.

“Officially recorded remittances to the developing world are expected to reach $440 billion in 2015, an increase of 0.9 per cent over the previous year,” the World Bank’s Migration and Development Brief report said.

“Global remittances, including those to high income countries, are projected to grow by 0.4 per cent to $586 billion.”

The anticipated 2015 remittance growth rates are the slowest since the global financial crisis in 2008/09. The slowdown will affect most developing regions, in particular Europe and Central Asia where flows are expected to decline by 12.7 per cent.

Nonetheless, the number of international migrants is expected to exceed 250 million in 2015, and their savings and remittances are expected to continue to grow in coming years.

The positive impact of an economic recovery in the United States will be partially offset by continued weakness in the Euro Area, the impact of lower oil prices on the Russian economy, the strengthening of the US dollar, and tighter immigration controls in many remittance source countries.

In line with the expected global economic recovery next year, the global flows of remittances are expected to accelerate by 4.1 per cent in 2016, to reach an estimated $610 billion, rising to $636 billion in 2017.

Remittance flows to developing countries are expected to recover in 2016 to reach $459 billion, rising to $479 billion in 2017.

The top five migrant destination countries continue to be the United States, Saudi Arabia, Germany, Russia and the United Arab Emirates (UAE).

The top five remittance recipient countries, in terms of value of remittances, continue to be India, China, Philippines, Mexico and Nigeria.

The global average cost of sending $200 held steady at eight per cent of the value of the transaction, as of the last quarter of 2014.

READ: Remittances jump 10.7 pc, help cushion currency

Despite its potential to lower costs, the use of mobile technology in cross-border transactions remains limited, due to the regulatory burden related to combating money laundering and terrorism financing, says the Brief.

International remittances sent via mobile technology accounted for less than two per cent of remittance flows in 2013, according to the latest available data.

“Total remittances in 2014 reached $583 billion (Sh49 trillion). This is more than double the ODA (overseas development assistance) in the world," said Kaushik Basu, World Bank Chief Economist and Senior Vice President.

“With new thinking these mega flows can be leveraged to finance development and infrastructure projects.”

Because remittances are large and more stable than many other types of capital flows, they can greatly enhance the recipient country’s sovereign credit rating, thus lowering borrowing costs and lengthening debt maturity, says the Brief.

In a recent development, rating agencies have started accounting for remittances in country credit ratings, but given data difficulties, there is still room for further improvement.