•Currently, an estimated four million Kenyans live, study and work abroad.
•CBK data shows the diaspora community cumulatively sent $4billion (Sh536.5 billion) in the 12 months to March 2023, compared to $3.9 billion (Sh 523.1 billion) in 2022.
Low exchange rates offered by banks in Kenya are discouraging the Kenyan diaspora community from tapping investment opportunities in the country, industry players and migrants’ now say.
This coupled with the high cost of sending money back home and time taken to clear transactions by banks has seen Kenyans in the diaspora continue to prefer digital applications and mobile money transactions, which fail to accommodate sizeable amounts for huge investments.
Hence, most cash sent back home (about 75 per cent) goes towards utility by family and friends with a paltry 25 per cent making it into savings, according to the Kenya Diaspora Alliance (KDA).
Locally, individual forex bureaus remain the most preferred over banks as they offer favourable rates.
For instance yesterday, exchange rates at banks were ranging between Sh128 and Sh130 to a dollar, below the Central Bank of Kenya’s 135 average.
Forex bureaus are offering up to 140, meaning one gets more value than going to the banks.
Banks were on the other hand selling the dollar at a high of 145, way above the CBK’s 135.5 mark, meaning importers or anyone buying are spending more.
“The rates are very discouraging, we need a platform that can offer value for the dollars sent home to encourage investments”KDA director Kent Libiso said.
He spoke during the launch of the Affordable Remittances and Enhanced Financial Inclusion Programme, targeted at rural communities.
This is an initiative by SME focused lender-Credit Bank, Interswitch and Ria Money Transfer, in association with KDA and Nyumba Mkononi, a mobile platform that connects people building homes with suppliers and manufacturers of building materials.
The programme co-funded by the European Union and the International Fund for Agriculture Development (IFAD) is targeting to utilise Sacco networks and digital solutions, to encourage investments mainly in real estate, individual home ownerships and agriculture sector.
It also targets to increase access to remittances by the rural populations.
“We want when Kenyans abroad send money back home, they can come back home to a productive asset, “Credit Bank CEO Betty Korir said, “.We believe that we can take advantage of our wide Sacco networks within our rural communities to make remittances more accessible at the least cost.”
Under this project, the lender will initially work with three Saccos for the next 16months and onboard an additional seven in the next 36months.
“In the next 16 months, we expect to have reached over 5,000 remittance customers with a target of about $50 million (Sh6.8 billion)channeled to productive uses, investments,” Korir said.
The move is likely to eliminate cases of Kenyans returning home to non-existent projects after toiling for years while sending money to relatives for development projects.
Under the programme, Credit Bank has committed to lower the cost of transaction on remittances from the current average of 8.46 per cent, to two per cent.
The programme has the financial backing of the European Union’s Platform for Remittances, Investments and Migrants’ Entrepreneurship in Africa (PRIME Africa).
“Saccos are key instruments in improving financial inclusion,” Remittances and Inclusive Digital Finance Officer, IFAD-FFR, David Berno said.
The Kenyan government is keen to grow annual inflows from about Sh430 billion to a trillion shillings, mainly through an aggressive global job hunt for Kenyans.
Currently, an estimated four million Kenyans live, study and work abroad.
CBK data shows the diaspora community cumulatively sent $4billion (Sh536.5 billion) in the 12 months to March 2023, compared to $3.9 billion (Sh 523.1 billion) sent in a similar period in 2022.
Last month, remittance inflows totaled $357 million (Sh47.9 billion) up from $309.2 million (Sh41.4 billion) in February, as they remained the leading source of foreign exchange earnings for the country.
“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 58 per cent,” CBK says in its weekly bulletin.
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), World Bank indicates, mainly on strong flows to Nigeria and Kenya,
They are however projected to soften to a 3.9 per cent growth this year, as adverse conditions in the global environment and regional source countries persist.