•According to World Bank, remittances are projected to decline by one per cent this year, due to weaker conditions in migrants’ destination countries.
•Education, healthcare and household needs are the main uses of remittances in Kenya, an analysis by WorldRemit indicates.
Lowering the cost of sending money remains a key factor in driving diaspora remittances this year, World Bank and industry players now says, amid inflationary pressures on households.
According to the global lender, remittances are projected to decline by one per cent this year, due to weaker conditions in migrants’ destination countries.
The cost of sending $200 for instance to Sub-Sahara Africa, including Kenya, costs 7.8 per cent on average last year, down from 8.7 per cent the previous year.
Remitting from countries in the least expensive corridors is on average 3.4 per cent compared to 25.2 per cent for the costliest corridors.
Last year, remittances to Sub-Saharan Africa, the region most highly exposed to the effects of the global crisis, grew an estimated 5.2 per cent to $53 billion (Sh6.96 trillion), compared with 16.4 per cent the previous year, due mainly to strong flows to Nigeria and Kenya, World Bank says it its report.
“Remittances in 2023 are projected to soften to 3.9 per cent growth as adverse conditions in the global environment and regional source countries persist,” World Bank notes.
To increase the volume of remittances, it is important to reduce costs.
In February, diaspora remittances did little to support the country's weakening forex reserves which have since dropped to a 10-year low.
Weekly data from the Central Bank of Kenya (CBK) shows Kenyans living and working abroad sent home $309.2 million (Sh39.9 billion), three per cent lower than $349.4 million (Sh45 billion) the previous month.
This is the lowest receipt in seven months since July last year.
Although the banking regulator did not give reasons for the decline, experts are linking it to the tough economic situation globally, with high inflation squeezing disposable income.
"This situation is expected to persist in the coming months as the anticipated recession manifests. This is a blow to Kenya's weak shilling as forex reserves meant to cushion drops,'' Financial expert Dan Mambo noted.
The cumulative inflows for the 12 months to February 2023 were however higher, totalling $4.03 billion (Sh520 billion), compared to $3.8 billion (Sh490.2 billion) in February 2022.
"The remittance inflows continue to support the current account and the foreign exchange market. The US remains the largest source of remittances into Kenya, accounting for 59 percent,'' CBK said.
At the height of the pandemic, global payment firms such as WorldRemit lowered prices for international transfers, making it cheaper to send money to 450 of its larger corridors in Africa.
The lowered prices, the firm says, allowed customers to send more to family and friends via the mobile app or website to the various African corridors, where Kenya was a major beneficiary.
Education, healthcare and household needs are the main uses of remittances in Kenya, an analysis by the firm indicates.
The high cost of education is expected to further push the cost of living for most families in Kenya.
"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.
According to the firm, families paid more than 1.75 times their monthly earnings on school supplies during the recent 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.
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,” management notes.
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.