•The US accounts for 58 per cent of remittances to Kenya, with global payment firm–WorldRemit maintaining a positive outlook for inflows from the key market.
•Kenyans living and working abroad have had to cut on their spending to afford sending money back home, a trend the firm says will continue in the short to medium-term.
Image: FREDRICK OMONDI
Diaspora remittances to Kenya are projected to remain strong despite last week’s Fed rate hike in the US, Kenya’s top source for inflows.
The Federal Reserve on Wednesday approved a fourth consecutive three-quarter point interest rate increase, as it continues to navigate bringing down inflation which has hit a 40-year high.
The central bank raised its short-term borrowing rate by 0.75 percentage point to a target range of 3.75 per cent and four per cent, the highest level since January 2008.
Nevertheless, Kenyans living in the diaspora are seen to retain their support back home both for families and investment, mainly in the real estate sector.
The US accounts for 58 per cent of remittances to Kenya, with global payment firm–WorldRemit maintaining a positive outlook for inflows from the key market.
Other sources are Europe, Middle East and other African countries.
"Migrants’ resilience and commitment to their loved ones back home has proven to be vital especially in a period where household expenses are increasing around the world,” World Remit notes.
Remittances are proving to be resilient overall, the firm notes, with migrants willing to make lifestyle adjustments to maintain the regular flow of remittances.
Majority (52%) however say they now send money to fewer people due to the tough economic times, a study by World Remit notes.
Central Bank of Kenya (CBK) data shows Kenyans living abroad sent home $318 million (Sh37.9 billion) in September, compared to $309.8 million (Sh36.9 billion) in the corresponding period last year, an increase of 2.6 per cent.
It was also an increase compared to $310.5 million (Sh37 billion) sent in August.
The cumulative inflows for the 12 months to September totaled $4 billion (Sh476.9 billion) compared to $3.5 billion (Sh417.3 billion) in the same period in 2021, an increase of about 13.per cent.
Education, healthcare and household needs continue to remain the main uses of remittances in Kenya, an analysis World Remit shows.
The high cost of education is expected to further push the cost of living for most families in Kenya.
According to the firm, families paid more than 1.75 times their monthly earnings on school supplies during the recent August back to school period.
Families in Morocco, Cameroon, Ghana, Guatemala and Kenya are all projected to spend more than the average monthly income on education.
The average living wage in the country is estimated to be Sh21,504 according to Trading Economics.
World Remit reaches over 5,000 money transfer corridors, including emerging markets with high barriers to entry, establishing digital connectivity into geographies that had previously been underserved.
This year, the remittances coupled with rebounding exports have been critical in keeping Kenya’s current account deficit stable , with the gap standing at 5.3 per cent of Gross Domestic Product (GDP) at the end of September, according to CBK data.
For families and friends, mobile money is the biggest channel of receiving cash in Kenya, particularly Mpesa.
"There is also a huge traffic on bank accounts. The shift towards digital platforms will continue shaping the industry, as the customer of today equally demands faster and convenient ways of sending and receiving money,” said Zepz Group CEO Mark Lenhard told the Star.
Zeps is the operating company for WorldRemit and Sendwave brands.
Kenyans living and working abroad have had to cut on their spending to afford sending money back home, a trend the firm says will continue in the short to medium-term.
A recent survey by the group conducted in June showed 49 per cent of respondents reported that they eat out less, 46 per cent save on day-to-day expenses, while 28 per cent have limited social gatherings to save money.
About 25 per cent of the respondents said they have opted for public transportation rather than driving to save, part of which has seen them continue to support families and friends back at home.
Meanwhile, the firm, which has over 200 employees in Kenya, is keen to cement its operations in the country, which it terms a regional financial hub and key economy in Sub-Sahara Africa.
It has agents and partners such as banks even as mobile money remains the most used mode of sending and receiving money.
"It (Kenya) is one of our best especially the talent that we see in this country. It is a tech hub that has the capacity to power the world. Mobile money for instance is big in Kenya among other innovations,” Lenhard said.