•Education, healthcare and household needs remain the main uses of remittances in Kenya, an analysis by WorldRemit indicates.
•Growth in remittance flows is expected to recover to 3.7 percent in 2024, with Nigeria, Ghana, Kenya and Zimbabwe among the biggest recipients in in the Sub-Sahara Africa.
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The African Continental Free Trade Area has potential to increase cross-border remittances by migrants, a report by World Bank now indicates, even as international markets remain the largest sources.
This comes as market projections indicate a possible slowdown in the growth of remittances to Sub-Saharan Africa, expected to fall from 6.1 per cent in 2022 to 1.3 per cent in 2023.
Risks to the outlook include capital outflows, measures to control foreign exchange and sanctions, World Bank notes.
Growth in remittance flows is expected to recover to 3.7 percent in 2024, with Nigeria, Ghana, Kenya and Zimbabwe among the biggest recipients in in the Sub-Sahara Africa.
Diaspora remittances are now Kenya’s largest foreign exchange earner, out preforming major exports such as tea, coffee and horticulture.
Data by the Central Bank of Kenya shows remittance inflows in August 2023 totaled $354.3 million (Sh52.5 billion), compared to $310.5 million (Sh46 billion )in August 2022, an increase of 14.1 percent.
The cumulative inflows for the 12 months to August 2023 totaled $4.12 billion (Sh610billion) compared to $3.99 billion (Sh591.1 billion) in the same period in 2022, with the continued weakening of the shilling pushing up the value.
“The strong remittances inflows continue to support the current account and the stability of the exchange rate. The US remains the largest source of remittances into Kenya, accounting for 54 percent in August 2023,” CBK said.
Regional growth in remittances in 2022 was largely driven by strong remittance growth in Ghana (12 per cent to $4.7 billion), Kenya (8.5 per cent to $4.1 billion), Tanzania (25 per cent to $0.7 billion), Uganda (17.3 per cent to $1.3 billion), and Rwanda (21.2 per cent to $0.5 billion).
Remittances to Nigeria, accounting for around 38 percent of total remittance inflows to the region, increased by 3.3 percent to $20.1 billion.
Last month’s figures for Kenya were however a 6.2 per cent drop compared to the $378.1 million (Sh56 billion) sent home by Kenyans living and working abroad, in July.
Global payment firms–WorldRemit however remains optimistic inflows to Kenya and other regions will remain stable with a possible increase as the December festive season approaches, especially in a period where the cost of living remains high.
"Migrants’ resilience and commitment to their loved ones back home has proven to be vital,” World Remit notes.
Education, healthcare and household needs remain the main uses of remittances in Kenya, an analysis by WorldRemit indicates.
In a recent study, WorldRemit, which reaches over 5,000 money transfer corridors, including emerging markets with high barriers to entry, found out that Kenyans in the diaspora had to cut on their spending to afford sending money back home.
About 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 had opted for public transportation rather than driving to save, part of which has seen them continue to support families and friends back at home.
For families and friends, mobile money is the biggest channel of receiving cash in Kenya, particularly Mpesa, amid 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,” WorldRemit management said.
According to World Bank, AfCFTA has the potential to make cross-border transactions such as remittance transfers by migrants within Africa cheaper through the Pan-African Payment and Settlement System (PAPSS).
“Intraregional remittances costs are still very high,’ World Bank noted in its report.
The PAPSS platform works in conjunction with central banks to facilitate direct transactions among the more than 40 currencies used throughout the continent.
It is an African Union infrastructure developed in collaboration with the African Export-Import Bank (Afreximbank) to complement trading under the AfCFTA.
Sub-Saharan Africa remains the region with the highest remittance costs where senders had to pay an average of 8.0 per cent to send $200 to African countries during 2022 Q4, World Bank notes, compared with 7.8 per cent in 2021 Q4.
“In Kenya, Rwanda, Tanzania, and Uganda, such transactions are constrained by limited interoperability among telecom operators and money transfer operators,” World Bank said in the report.
Kenya, which is among six countries piloting the AfCFTA, is prioritising professional services, tourism, education, health, financial services, ICT, cultural and sports services; and transport and logistics, alongside trade in merchandise.