Kenya diaspora remittances top in East Africa

Kenyans living abroad sent home more money last year than the rest of the East Africa Diaspora combined, World Bank data shows, revealing the difference in the quality of earnings of the different nationalities.

Kenya’s Diaspora remittances in 2018 stood at Sh280 billion, eclipsing the Sh242 billion sent to the rest of Eastern Africa — comprising Uganda, Tanzania, Rwanda, Burundi, South Sudan and Ethiopia.

A World Bank unit known as the Global Knowledge Partnership on Migration and Development prepared the report released in April 2019.

The year-on-year growth in Kenyan remittances between 2017 and 2018 was 39 percent. In the first five months of 2019, remittances stood at Sh118.9 billion, a 3.8 per cent increase on the same period in 2018.

The growth this year has, however, been much slower than that of last year, when in the first five months of 2018 the remittances had gone up by 51.8 percent to Sh114.6 billion compared to the same period in 2017.

“Remittances to sub-Saharan Africa were estimated to grow by 9.6 percent from $42 billion in 2017 to $46 billion in 2018. Projections indicate that remittances to the region will keep increasing but at a lower rate, to $48 billion by 2019 and to $51 billion by 2020,” said the World Bank in the report.

“The upward trend observed since 2016 is explained by strong economic conditions in the high-income economies where many sub-Saharan African migrants earn their income.”

The remittances in Kenya have risen to become the biggest source of foreign exchange, ahead of tourism, tea, coffee and horticulture exports.

They have played a big role in the stability of the shilling in the past three years when peer currencies in the region have to various degrees depreciated against the US dollar.

North America typically accounts for the bulk of Kenyan remittances, reaching about 45 percent on average, followed by Europe at about 23 percent while the rest of the world accounts for about 32 percent.

There are more than three millions Kenyans living abroad, many of whom have attained tertiary education and are working in the formal sector jobs.

The US is a popular destination for Kenyans looking for greener pastures and further education, with the latter mostly remaining in the destination countries for work after graduation.

In recent years, however, the Middle East and China are also emerging as a choice destination for those looking for external work opportunities, in line with the rapid economic growth in these regions.

It also helps if a country has a well-developed banking sector, which opens up formal channels of remitting money back home and reduces the cost of doing so.

The Central Bank of Kenya has, for instance, identified the ease of sending money back home as a major factor in the sharp growth of Kenyan remittances.

Local banks have entered partnerships with remittance service providers that allow them to handle larger volumes of inflows.

The expansion of the popular M-Pesa service beyond Kenya’s borders is also helping, with direct cash transfers on mobile making it easier for the millions who actively use mobile money to receive money instantly from relative abroad.

One of the biggest impediments to inward African remittances has over the years been identified as cost, partly attributable to the lower than global average penetration of formal banking in the continent.

The World Bank report shows that remittances to sub-Saharan Africa remain the most expensive across the different regions of the world.

“The cost was the lowest in South Asia, at five percent, while sub-Saharan Africa continued to have the highest average cost, at 9.3 percent.

“Remittance costs across many African corridors and small islands in the Pacific remain above 10 percent,” said the World Bank in the report.

Ease of movement of capital also helps. Countries that do not restrict the movement of hard currency are, therefore, likelier to attract foreign investment flows, which encourage the setting up of more robust support infrastructure for remitting money.

Remittances as a measure of gross domestic product in 2018 are therefore higher in countries such as Kenya (three percent), Uganda (4.5 percent) and Rwanda (2.4 percent) in the region, while remaining lower in Ethiopia (0.5 percent) and Tanzania (0.8 percent).

Looking at the wide continent, Kenya was fifth last year in terms of volume of money remitted.

Egypt and Nigeria, which are two of Africa’s most populous countries and boast of a large diaspora, led the continent with inflows of Sh2.98 trillion ($28.9 billion) and Sh2.5 trillion ($24.3 billion) respectively last year.

Morocco and Ghana saw remittances of Sh760 billion (7.38 billion) and Sh391.4 billion ($3.8 billion) respectively to also come in ahead of Kenya on the list.

In East Africa, remittances stood at Sh128.4 billion for Uganda, Sh44.3 billion for Tanzania, and Sh42.4 billion in Ethiopia. Rwanda and Burundi had remittances worth Sh23.7 billion and Sh3.7 billion respectively, while there was no data available for South Sudan and Somalia for 2018 in the World Bank report.