Back to school to push up diaspora remittances – WorldRemit

 The back-to-school rush in Kenya is expected to push up diaspora remittances as families and friends living abroad chip in to support those back at home. 

Inflows are expected to remain above the Sh40 billion-mark experienced last month, according to global payments firm–WorldRemit, when remittances picked after a slow down in February.

Central Bank of Kenya (CBK) data shows Kenyans living abroad sent more money in the month of March compared to February, as remittances continue to support the current account and the stability of the exchange rate.

In March, inflows hit a record monthly high of $363.6 million (Sh42.2 billion.

This was up from $321.5 million (Sh37.3 billion) sent in February, with the strong dollar against the shilling giving receivers more cash back at home. 

“Before the March rebound, remittances were down five per cent in February compared with January. Historically the general trend has been for remittance flows to slow after the Christmas period, before picking up again as we head to Ramadan, Easter and the back to school period,” said Sharon Kinyanjui, WorldRemit’s Director Europe Middle East and Africa Receive Markets.

“We expect this momentum to remain but are cautious given the risk of inflation and recession in developed economies where remittances originate,” she added. 

Education and health remain the leading uses and purposes of sending money back home, industry data shows, with the US the main market source.

However, Gulf states such as Saudi Arabia, United Arab Emirates, Qatar, and Bahrain have emerged as important destinations as more Kenyans continue to look for opportunities abroad. 

CBK data for February inflows indicates that the leading source in this region is Saudi, followed by Qatar and UAE.

“These countries have emerged as important sources of remittances,” Kinyanjui noted during a telephone interview with the Star yesterday, adding there is also a growth in the number of people sending money for investments and business.

Mothers remain the biggest receivers.

According to the CBK’s recent survey, 20 percent of diaspora remittance is received by mothers, compared to 10 per cent for fathers. 

Digitization remains a key driver for growth of remittance services, the global firm notes, with major developments being registered during the pandemic.

“ This is good for both senders and receivers as digital services are more affordable, secure and convenient. Innovation and customer service are also going to be a big differentiator for service providers as competition is intensifying in the market,” Kinyanjui said.

In January, Kenyans living and working abroad sent home $338.7 million (Sh39.2 billion).

This year’s March inflows were 25.2 per cent higher compared to $290.8 million (Sh33.7 billion) sent home in the same month last year.

The cumulative inflows for the 12 months to March 2022 totaled $3.91 billion (Sh453.6 billion), CBK notes, compared to $3.22 billion (Sh373.6 billion) same period in 2021, an increase of 21.6 percent.

“The US remains the largest source of remittances into Kenya, accounting for 58 percent in March 2022,” CBK says in its weekly bulletin.

The other top source countries are UK (11.2 per cent), Saudi Arabia (4.0 per cent), Canada (2.9 per cent), and Australia (2.9 per cent).

Tanzania, Uganda, and South Africa lead as the top African source markets for remittance inflows into Kenya.

Diaspora remittances are now Kenya's biggest forex earner after overtaking tea, coffee, and tourism in 2017. 

Tea and coffee earnings have been shrinking in recent times due to high global supply, and eroding prices.

Kenya is ranked third among the biggest recipients in Sub-Saharan Africa, after Nigeria and Ghana.

Approximately three million Kenyans are living abroad according to the Ministry of Foreign Affairs.

Despite Covid-19, officially recorded remittance flows to low- and middle-income countries reached Sh58.2 trillion in 2020, just 1.6 per cent below the 2019 total of Sh59.1 trillion.

“As Covid-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank.

Excluding Nigeria, remittance flows to Sub-Saharan African increased by 2.3 per cent with growth reported in Zambia (37 per cent), Mozambique (16 per cent), Kenya (9 per cent) and Ghana (5 per cent).

The inflows play a critical role in the country's forex reserves, cushioning the Kenyan economy, besides supporting millions of families.

The International Organisation for Migration–UK has been calling on governments, the financial sector, and money transfer operators to commit to a cross-sector approach to facilitate cheaper, transparent, and more accessible remittances worldwide that leverage their full potential development.