Remittances from the diaspora can be a viable alternative to foreign loana

Over the past three years, remittance by the Kenyans in the diaspora has become the largest single source of foreign exchange overtaking forex earnings from tea, horticulture or tourism.

According to the Central Bank of Kenya, diaspora remittance hit Sh64 billion in the first three months of 2018, over half of it from North America and 30 percent from Europe.

The remittances have increased from the previous Sh18.5 billion high in October 2017 to over Sh20 billion monthly since December 2017 for a record Sh22.2 billion in March this year.

Should this exponential growth continue, remittances could increase from Sh197 billion in 2017 to a record Sh250 billion in 2018, representing a 25 percent growth. This figure only accounts for funds sent home through official banking channels, as such the figure may be less than 70 per cent of the actual remittances into our nation as some funds are moved via informal channels.

This growth in the diaspora remittance has increased despite the decline in Remittance flows to Sub-Saharan Africa by an estimated 6.1 per cent to $33 billion (Sh3.3 trillion) in 2016, due to slow economic growth in remittance sending countries such as the UK and Australia and diversion of remittances into informal channels due to controlled exchange rate systems in the formal market.

Remittances to sub-Saharan Africa were projected to increase by 3.3 percent to $34 billion (Sh2.2trillion) in 2017, with Nigeria expected to get over $20 billion (Sh 2 Trillion) of that figure.

Over three million Kenyans live in the diaspora, Majority of them in African countries and others in US, Canada, United Kingdom, Asia and the Middle East. Africa has the largest number of Kenyans living and working abroad, estimated at one million followed by Europe at around 400,000. North America, including Canada, and Latin America, is said to have about 200,000 Kenyans. An estimated 150,000 of them live and work in the US.

The Middle East has about 80,000 Kenyans, more than half working and living in Dubai. An estimated 150,000 Kenyans live in Asia, the majority of them in China. The Caribbean, Australia and New Zealand have a combined Kenyan population of about 50,000.

Kenyans in the diaspora send money back home for many reasons. Besides family support on food, education and medical expenses, they have significantly invested in the real estate sector.

Given the volume and stability of the remittances, the government should establish formal mechanisms of channelling the diaspora funds to development.

However, to channel remittances into the formal economy and spur economic growth in Kenya, there is need to build the diaspora community confidence in local financial systems and craft policies that incentivize them to think of investment instead of spending.

Investment inquiries from abroad are growing as most are nearing two decades of living in the diaspora and have made sufficient property investments back home to cushion them. So the time is now ripe for large-scale investments back home, guaranteed those investments are safe and returns are sustainable.

DOMINIC NZUKI, Management consultant, Altima Africa Limited.