Data is at the centre of everything but for a long time, it has been scarce — held by only a few institutions in small fragments.
But today, technology is not only giving us access to this information, it is also making it possible to consolidate it, allowing us to track and understand the trends behind our everyday lives.
When a relative from abroad sends money back home, the Central Bank of Kenya (CBK) knows this through its supervision of the banking systems and it estimates that about $400 million is sent home annually.
This has driven a lot of attention to this sector whose growing importance can be seen to rival tea, coffee, horticulture and tourism which were Kenya’s traditional foreign exchange earners.
Both the government and private sector are also paying attention to this sector and are innovating to come up with technological solutions that bring more insights into the trends of the money sent back home and allow more investments to be channelled efficiently back into the home economy.
Kenyan diaspora is the biggest sender of digital remittances to mobile accounts marking the extensive technological leap that has marked this sector.
Kenya is ranked fifth in Africa regarding the value of remittances sent home by countrymen living abroad.
Data from the CBK further indicates that the 12-month average for remittances to Kenya has gone up 44 percent from $240 million in December 2019 to $345.9 million in June 2023.
It is against this backdrop that Nairobi recently played host for the 2023 edition of the Global Forum on Remittances, Investment and Development Summit.
The eyes of the world wanted to understand how these technological investments can be harnessed to bring down the cost and bureaucracy around sending money back home and learn Kenyan lessons on how to get the money to the last mile.
With one in eight people directly involved in sending or receiving remittances and more than half of these in rural areas, the summit sought to bring together thought leaders from various countries to develop actionable guidelines on how economies can grow diaspora remittances and investments.
In most nations, the mode of sending money is usually quite fragmented leading to higher costs for senders who typically have to route their transfers through several jurisdictions, each with its own burden of compliance.
This, in turn, has created obscurity across the transactions which has meant little policy actions have been taken to streamline remittances.
The lack of data also reduces the ability of service providers across borders to adopt uniform legal, technological and financial standards.
One of the top priority areas identified at the three-day event was that there was a significant lack of data on global remittances that hinders the formulation of effective policy.
Here in Kenya, we have demonstrated that data can be crucial both in policy and investments along the value chain and were lauded alongside Italy and Uganda for having diligent central bankers who collect quite granular data on remittances.
A survey conducted by the CBK in December 2021 showed how this data can be converted into meaningful information to help allocate resources towards location, demographics and investments being targeted by the diaspora to make flows more efficient.
The survey revealed locations with the most Kenyan diaspora, more than a fifth in the United States, with the United Kingdom and the United Arab Emirates, ranking second and third respectively and indicated that the average stay abroad was about a decade.
The survey also showed that more than half of the diaspora Kenyans were highly educated with 26 percent having a Bachelor’s degree and 34 percent a Master’s degree.
This data underlines the notion that Kenya’s diaspora community, along with their remittances and investments, provide the country with an opportunity for a long-term source of investment capital especially now that global capital has become risk-averse.
To facilitate this, the Kenyan financial system has been able to tap into this knowledge to develop solutions that serve the needs of the diaspora at the least cost.
The gateway
At Credit Bank we have partnered with the International Finance for Agriculture (IFAD), to build the gateway between Kenyans in the diaspora and their relatives back in the rural communities through partnerships with rural saccos that deliver diaspora remittances to the last mile at a fraction of the current cost.
We understand better about the quantum sent home to price our services better — nearly half said they sent home an average of Sh75,000 monthly.
The data has also provided insights into the demographics of Kenyans who received remittances sent from abroad so that we build better linkages to get money to the last mile as fast and as efficiently as possible.
In Africa, however, only six countries are publishing data on this regular and granular level. There is a strong urgency to develop data repositories that aggregate information from several jurisdictions into one platform that is updated regularly.
Data analytics can assist policymakers in central banks to develop policies from a point of information and provide a grounding for financial service providers deploying innovative solutions for their clients.
While the CBK has been commendable in collecting statistics and data on remittances, there is still much to be done to bring down the cost and better utilise diaspora investments.
The writer is the CEO of Credit Bank PLC.
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