Cash sent back home by Kenyans working abroad became the country’s highest foreign exchange earner last year outperforming the tea sector, with the gap forecast to widen this year.
Fresh Central Bank of Kenya (CBK) analysis shows those working in the diaspora sent back home Sh138 billion ($1.38 billion) compared to Sh110 billion ($1.1 billion) earned from tea.
Remittances according to the bank’s presentation will rise to just under $1.5 billion this year with tea registering less forex earnings than last year.
“Traditional exports have weakened but remittances remain strong,” said Central Bank governor Patrick Njoroge told parliamentary Committee on Finance Planning and Trade last week.
Diaspora remittances had traditionally ranked fifth behind tea, horticulture, coffee and tourism but a rise in attractive investments has seen more Kenyans working abroad invest back home, especially in the real estate sector.
The production of tea and coffee has taken a dip as poor returns saw farmers in catchment areas, especially central Kenya, move on to more rewarding ventures such as real estate.
While previously coffee was worst hit, tea has not been spared either. Genesis Investment Management, majority owned by listed Centum Investments, for instance has recently revealed plans to convert a 191-acre piece of agricultural land to real estate.
The prime piece of land is located along Kiambu-Limuru road where tea estates have been making way for real estate development.
Tourism has taken a hit from recent terror attacks which have seen traditional markets such as Britain and America issue travel advisories to their citizens.
Central Bank has cited the remittances as key suppliers of dollars supporting the battered shilling in the foreign currency market.
This growing relevance of the diaspora community has seen the government organise State-sponsored forums attended by President Uhuru Kenyatta over the past two years to address their concerns and keep them close.
High cost of sending money back home through official channels has been cited as an impediment by citizens living abroad prompting a strategy rethink by the government.
“We have analysed the cost of transferring money from the diaspora to Kenya to identify areas in which we can lower charges such as taxation and transfer fees,” Cabinet secretary Henry Rotich told the Business Daily in a previous interview.
The government also hopes that the increased competition among commercial banks jostling for a pie of the remittances business would result in lower sending fees.
The remittances provide the banks with cheap source of deposits, foreign currency and earns them transactional income.
KCB last week announced that it had formed a department with 10 employees focused on growing its market share in the remittance business from current seven per cent to more than 10 per cent.
Equity Bank said it had increased its commissions from diaspora remittances by 27 per cent to Sh84.7 million in the six months to June. The bank remitted Sh6.5 billion in the year to June compared to Sh4.7 billion last year.
“We have partnered with key payment companies which has allowed us to grow our number of transactions and commissions,” said Equity Bank chief executive James Mwangi.
The bank has partnered with transfer companies such as Paypal, Western Union and Moneygram.
Mobile money transfer for international cash transfers is also gaining prominence in the country since it is flexible and cheaper.
According to GSMA — the global association of telecoms operators — the average cost of sending Sh9,336 via mobile money is Sh375 less than half the average cost of sending money globally through traditional money transfer channels.
Safaricom has partnered with traditional service providers, Western Union and MoneyGram to move money into Kenya via M-Pesa.