Remittances from the diaspora surpassed the 2008 record of $611 million as incomes stabilised and Kenyans working abroad seeking higher returns took advantage of the high economic growth.
According to the Central Bank of Kenya (CBK), the diaspora remitted Sh51 billion ($642 million) in 2010, about 5.4 per cent higher than the Sh48 billion ($609 million) remitted in 2009.
CBK said that in December Sh5.2 billion ($65.61 million) was remitted — the highest amount for the entire year.
“The increase in remittances in 2010 reflects continued economic recovery in source markets since the onset of the global financial crisis in 2008, and restoration of confidence in the domestic economic environment,” said Charles Gitari Koori, director of Research Department, CBK. “The source markets for remittances have on average maintained the same shares with the US contributing an average of 54 per cent and Europe 27 per cent of total remittances to Kenya in 2010, compared with an average of 52 per cent and 26 per cent respectively in 2009,” he said in the latest monthly CBK update.
Bank of Africa (BOA) analysts expect the trend to continue so long as interest rates and other rates of return remain low in Eurozone and other Western countries.
“In the past one year, we have seen some stability in the Eurozone and other Western countries in that Kenyans working there are now holding jobs and some have better jobs, so there has been some stability in income,” said Robert Gatobu, a dealer at BOA.
“Interest rates are also low in the Eurozone and other Western countries and so they prefer to invest here… also rates of return here in real estate and other sectors are higher,” he added.
KCB’s head of treasury, retail and SME sales Louis Karisa Yaa said the bank had witnessed a general increment “in the region of around seven to eight per cent for the year as dollar and other currency volumes showed higher densities”.
He attributed the increase to a “visible economic recovery in the originating markets such as North America, Europe and Asia,” adding that “there was an improving stable investment environment in the country, supported by calm fiscal, monetary policies and relatively good political climate”.
“Low local inflationary pressures in the year meant more remittances to pay for similar levels of goods and services. There is increasing confidence among Kenyan diaspora population regarding safety of the local money transfer systems developments,” he added.
In a recent survey by the World Bank, KCB was rated as one of the preferred banks by Kenyans abroad to transfer money, an aspect that the bank attributed to its branch network especially in the East African region.
According to the survey, Western Union was still the most preferred method of transferring money from abroad while other banks used frequently include Equity, Barclays, Cooperative, Post Bank and National Bank.
Remittances are a significant source of foreign exchange and official releases by the government show that in 2010 they compare well with other sectors such as tea, which earned the country Sh97 billion, horticulture Sh78 billion, while tourism is projected to have earned the country approximately Sh100 billion.
In 2009 these sectors earned the country Sh69 billion , Sh72 billion and Sh50 billion respectively.
“Remittances still form an important component of the system’s net receipts and a good source in stabilising our local currency’s exchange rate,” said Mr Karisa.