Diaspora inflows growth slows down

Kenyans abroad sent home Sh214.40 billion in the first nine months of the year, marking a 4.34 percent growth over Sh205.48 billion remitted over the same period a year earlier.

Central Bank of Kenya (CBK) data shows some Sh22.11 billion was wired home in September, the third lowest this year after February (Sh20.50 billion) and August (Sh22.07 billion).

A record Sh30.39 billion ($295 million) was remitted by the diaspora in June, which marked the end of a two-year blanket tax amnesty for Kenyans wishing to declare and repatriate offshore wealth. Applications worth more than Sh800 billion in cash and other assets were made during the exercise, the Kenya Revenue Authority (KRA) said on October 1.

The inflows remain stronger this year than they were in 2018 year-to-date according to CBK data that only captures cash through formal channels.

“The cumulative inflows in the 12-months to September 2019 increased to $2,786 million (nearly Sh286.96 billion) compared to $2,579 million (nearly Sh265.64 billion) in September 2018, reflecting a growth of eight percent,” CBK wrote in this week’s bulletin.

“North America, Europe and the rest of the world accounted for 51 percent, 19 percent and 30 percent, respectively, of the total remittances in September.”

Analysts at Cytonn Investments attributed the stronger inflows to increased uptake of financial products by the diaspora as well as new partnerships between international money remittance providers and local commercial banks, which has enhanced convenience.

Increased dollar inflows from citizens in foreign countries has partly helped ease pressure on the shilling this year by supporting the supply side of the dollars against demand by importers shipping in goods and companies paying expatriates and dividends to foreigners.

A parliamentary unit, however, warned earlier in the year that over-reliance on “hot money flows” such as remittances as the main source for foreign exchange reserves poses a major risk to shilling going forward.