Kenya reaps as inflows to S.Saharan Africa grow to Sh6.5tr

Kenya is among the biggest recipients of diaspora remittances this year, latest World Bank report indicates, as inflows to Sub-Sahara Africa grew 5.2 per cent to $53 billion (Sh6.5 trillion).

Remittances to low- and middle-income countries withstood global headwinds in 2022, growing an estimated five per cent to $626 billion (Sh76.7 trillion), the global lender has said.

Reopening of host economies as the Covid-19 pandemic receded supported migrants’ employment and their ability to continue helping their families back home, the global lender notes.

While rising prices adversely affected migrants’ real incomes, the strong inflows reflect leading digital remittances company – WorldRemit’s migrants survey which showed changing behaviours among migrants, to maintain financial obligations to family overseas.

Since the beginning of the year, 78 per cent of respondents agreed that their cost of living has increased, with the most impacted areas seen across utility costs (82%), transport (77%), daily living (84%), housing (64%) and healthcare expenses (54%). 

“Globally, the main reason people cited they send money to loved ones overseas is for day-to-day expenses that are food, transportation, clothing, accounting for more than half of all money sent overseas (53%),” WorlRemit says in its report.

This, even as education, healthcare, and household needs remain the main uses of remittances in Kenya, according to WorlRemit which projects strong inflows this month as the year ends.

This will be driven by among others, migrants sending home money to families for the festive season activities.

“We have seen people adjust lifestyles to be able to save and send money back home. We expect this to continue,” Zepz Group CEO Mark Lenhard told the Star. 

Zepz, formerly WorldRemit Group, is a digital cross-border payments platform operating two brands (WorldRemit and Sendwave, acquired in 2021), with over 11 million users across 150 countries.

Central Bank of Kenya has also projected strong inflows in December, which it counts on to help bridge the current account deficit in the wake of a rising import bill, and stabilising the weak shilling.

The cumulative inflows for the 12 months to October totalled $3.9 billion (Sh478.3 billion) compared to $3.6 billion (Sh441.5 billion) in October 2021, an 8.3 per cent increase.

“We expect remittances to be strong as we move towards the end of the year. November and December are normally a strong period on remittances,” CBK governor Patrick Njoroge said during a post-Monetary Policy Committee briefing, on November 24.

Kenya and Nigeria have had strong inflows this year according to the World Bank, which notes remittances remain a vital source of household income for low- and middle-income countries.

 They alleviate poverty, improve nutritional outcomes, and are associated with increased birth weight and higher school enrollment rates for children in disadvantaged households, World Bank notes.

Studies show that remittances help recipient households to build resilience, for example through financing better housing and to cope with the losses in the aftermath of disasters.

Migrants help to ease tight labour markets in host countries while supporting their families through remittances, notes Michal Rutkowski, World Bank global director for social protection and jobs.

“Inclusive social protection policies have helped workers weather the income and employment uncertainties created by the Covid-19 pandemic,” Rutkowski said. 

By region, Africa stands to be the most severely exposed to concurrent crises, including severe drought and spikes in global energy and food commodity prices.

Meanwhile, the global lender notes the cost of sending money remains high.

For instance, sending $200 across international borders to low- and middle-income countries, which remains high at six per cent on average in the second quarter of 2022, according to the Remittances Prices Worldwide Database.

It is cheapest to send via mobile operators (3.5%), but digital channels account for less than one per cent of total transaction volume.

Digital technologies allow for significantly faster and cheaper remittance services.

However, the burden of compliance with Anti-Money Laundering/Combating the Financing of Terrorism regulations continues to restrict access of new service providers to correspondent banks.

These regulations also affect migrants’ access to digital remittance services.

“We agree that the cost of sending money, particularly to Africa is high. We have been keen on driving that cost down and that is why for example our Sendwave platform does not charge fees. At WorldRemit, we are sensitive on pricing and we ensure that we give our clients affordable terms,” Zepz’s Lenhard told the Star. 

The US remains the largest source of remittances into Kenya, accounting for 57.6 per cent in October, according to CBK.

There has also been growing inflows from the Middle East which has been identified as one of the key drivers of inflows this year, as the number of Kenyans securing jobs in the region continues to rise.

The gulf states include Saudi Arabia, United Arab Emirates, Qatar, and Bahrain, key destinations for domestic jobs.

According to the Labour Ministry, the number of Kenyans in the Middle East has risen to above 98,000 from about 55,000 in 2019.

Globally, the number of Kenyan migrant workers is over four million, with a greater percentage being skilled youth.