Wednesday, July 24, 2024

Kenyan Diaspora Remittances dropped by Sh5 billion in April

Kenyan Diaspora Remittances dropped by Sh5 billion in April
Kenyan Diaspora Remittances dropped by Sh5 billion in April

The amount of money sent home by Kenyans living abroad dropped Sh5.1 billion in April to $320.3 million (Sh44.1 billion), latest official data shows.

This is a 10.5 per cent decrease equivalent to $36.7 million compared to the the $357 million (Sh49.1 billion) remitted the previous month.

According to the Central Bank of Kenya, the US remains the largest source of remittances into Kenya, accounting for 57 per cent.

“The cumulative inflows for the 12 months to April remittance totaled $ 3,985 million (Sh548.5 billion) compared to $3,968 million (Sh546.2 billion) in a similar period 2022, an increase of 0.4 percent,” CBK said in its weekly bulletin.

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However, CBK maintained that the remittance inflows continue to support the current account and the foreign exchange market.

Usable foreign exchange reserves have been dropping in recent months, closing last week at $6.3 billion (Sh865.8 billion), which is 3.5 months of import cover.

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North America remains dominant in the amount of money sent by Kenyans, followed by Europe and the rest of the world.

In the month of April the US remained the largest source of remittances into Kenya, accounting for 57 per cent.

Analysts had projected the weakening shilling could drive an increase in the amount Kenyans sent home but CBK data shows that contrary.

The Kenya shilling continued to shed its value against the US dollar last week exchanging at Sh137.37 as at the May 18, compared to Sh136.79 a week earlier.

Reduced April remittances comes amidst a general fall in the amount of cash sent home by Kenyans living and working abroad this year.

In the three months to March, CBK announced that remittances had dropped to $1.016 billion (Sh137.4 billion) from $1.024 billion (Sh138.5 billion) in the same period last year.

The remittances fell for the first time since 2010 as inflation hit multi-decade highs in many countries, squeezing household budgets.

While inflation in the key source of US has been a major concern, remittances are nevertheless expected to remain stable, as Kenyans living in the diaspora continue to make sacrifices to support loved ones back at home.

According to international money transfer service firm–WorldRemit, more than half (54 per cent) of remittance senders have taken up a side hustle since the Covid-19 pandemic struck, with almost one-fifth doing so to be able to continue supporting families and friends back home.

The trend is expected to continue this year, as individuals search for secondary sources of income to supplement existing channels.

Dubbed the ‘Cost of Living Index’, WorldRemit sought to understand how the high inflation has affected the lives of international money senders around the world.

The survey found that 82 per cent of remittance senders, including Kenyan migrants who are key remittance senders in the US, Australia, and UK markets, agreed that the cost of living for the people to who they send money to has risen since the start of the year.

With several factors contributing to increased financial pressure, new data shows that 72 per cent of respondents in the US, 41 per cent in Australia, and 44 per cent in the UK have taken up a side hustle.

An earlier study by the firm had indicated Kenya’s abroad have had to cut on their spending to afford sending money back home.

“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,” Jorge Godinez Reyes, Head of the Americas, WorldRemit, had noted.

Education, healthcare and household needs continue to remain the main uses of remittances in Kenya, an analysis by WorldRemit indicates.

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.

“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.

There is a conversation by member countries of the Regional African bloc, Inter-Governmental Authority for Development (IGAD), to harmonise diaspora transaction fees to increase inflows.

Despite the region having high volumes of remittances from abroad, transaction rates are way above the global average.

In contrast to the global average of 6.5 per cent, the average cost of sending remittances to the IGAD region is 8.9 percent, which is approximately three times the Sustainable Development Goals target rate of below three percent.

Since 2015, the inflows have continued to be Kenya’s biggest source of foreign currency flows, surpassing tourists, FDIs, and top agricultural exports including horticulture and tea.

Remittances not only represent an important source of forex but also support many livelihoods.

Digitisation remains a key driver for the growth of remittance services, according to players in the remittance space.

The 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.

However, an estimated 75 per cent of the cash sent back home goes towards utility by family and friends with a paltry 25 per cent making it into savings, according to the Kenya Diaspora Alliance (KDA).

Kenya is among the top three countries in Africa in receiving remittances with Nigeria leading.

World Bank projects remittances to Sub-Saharan Africa,the region most highly exposed to the effects of the global crisis, will grow by 3.9 per cent in 2023.




Kenyan Diaspora Remittances dropped by Sh5 billion in April

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