RECORD HIGH

Diaspora remittances hit Sh421bn as tech drives inflows

Expected to grow further in 2022.

In Summary

•Inflows in December was an all-time record of $350.6 million

•The cumulative inflows in 2021 were 20.1 per cent higher compared to $3.094 billion (Sh350.9 billion) in 2020.

Kenyans living abroad sent home a record $3.718 billion (Sh421.6 billion) last year, latest Central Bank data shows, as they supported families back at home during the festive season.

This, as a shift to technology in the remittance industry, continues to accelerate following the Covid-19 pandemic, with industry players predicting even a further growth on inflows, driven by tech.

The cumulative inflows in 2021 were 20.1 per cent higher compared to $3.094 billion (Sh350.9 billion) in 2020.

“The US remains the largest source of remittances into Kenya, accounting for 63.2 percent in 2021,” the Central Bank of Kenya notes in its weekly bulletin.

Remittance inflows in December 2021 were an all-time record of $350.6 million (Sh39.8 billion), compared to $299.6 million (Sh33.9 billion) in December 2020, a 17 per cent increase.

They were also higher by 9.5 per cent compared to the $320.1 million (Sh36.2 billion) sent home in November, in line with seasonal factors.

Earlier in October, Kenyans living and working abroad had dent home $337.4 million (Sh38.2 billion).

Global payments firm–WorldRemit had in October projected a rise in remittances in December as schools reopened and the December festive season.

According to the firm, most of the monies have been going towards education, healthcare, and household needs.

Technology is expected to even further drive inflows this year, WorldRemit says.

“The shift to tech in the remittance industry that accelerated following the Covid-19 pandemic is here to stay. We anticipate more senders and receivers to opt for digital channels versus traditional international money transfer options,” Sharon Kinyanjui, Director Europe, Middle East and Africa Receive Markets, WorldRemit, told the Star yesterday.

Digital money transfer services will remain the growth drivers of the industry, she noted.

The firm however notes the cost of transfers is likely to be an important conversation in 2022, with data from World Bank and other sources indicating that the cost of remittances to Africa is still higher than the rest of the world, making affordability a key differentiator.

“For digital money transfer providers, excellent customer experience will be key to winning. The market has gotten more competitive, and customers demand the best, " said Kinyanjui, who has recently been named as one of the 2022 Top 10 Women to Watch as part of the Angaza Awards.

The firm which has a presence in more than 150 countries recently lowered transaction fees for international transfers in over 450 of its larger corridors in Africa, allowing customers to send more to family and friends via the mobile app and website.

This price drop represented the largest pricing reduction in terms of the number of corridors for the business.

There are an estimated four million Kenyans living and working abroad according to the Ministry of Labor and Social Protection.

Apart from the US, other key market sources of remittances to Kenya are the UK, Germany, and Canada.

Gulf states such as Saudi Arabia, United Arab Emirates, Qatar, and Bahrain have also emerged as important drivers of remittances, key destinations for domestic jobs.

World Bank projects remittances to low-and middle-income countries to have grown a strong 7.3 per cent to reach $589 billion (Sh66.8 trillion) in 2021.

This return to growth is more robust than earlier estimates and follows the resilience of flows in 2020 when remittances declined by only 1.7 per cent.

This was despite a severe global recession due to Covid-19, according to estimates from the World Bank’s Migration and Development Brief.

For a second consecutive year, remittance flows to low- and middle-income countries (excluding China) are expected to surpass the sum of foreign direct investment (FDI) and overseas development assistance (ODA).

This underscores the importance of remittances in providing a critical lifeline by supporting household spending on essential items such as food, health, and education during periods of economic hardship in migrants’ countries of origin.

“Remittance flows from migrants have greatly complemented government cash transfer programs to support families suffering economic hardships during the Covid-19 crisis,” notes Michal Rutkowski, World Bank Global Director for Social Protection and Jobs.

“Facilitating the flow of remittances to provide relief to strained household budgets should be a key component of government policies to support a global recovery from the pandemic Rutkowski adds.