Kenyan rapid acceleration of digitalization had to potential increase in access and use of the remittances for greater financial inclusion and investment opportunities. Formal remittances and inflows from diaspora communities in Kenya are currently worth more than the combined value of tea and coffee exports.
On a global scale, remittances are an essential economic lifeline. In times of crisis, whether natural or man-made, migrants tend to send more money to their families to help them survive or recover. Remittances exceed official development aid, but are private funds. Higher levels of remittances provide opportunities for recipients to open bank accounts, enhance their savings, and access financial systems, in addition to exposing the previously unbanked to both new and existing financial products.
The remittance flows are accordingly much higher for developing countries and its flow has grown not only in size but also in importance in terms of their share in GDP. A growing number of developing countries and international institutions now view migrants in the diaspora as an antidote to brain drain, with a greater role to play in national development. Evidently, migrants can contribute to developing their countries of origin through remittances, gifts or even investments. There is also growing evidence that immigrant remittances have increased exponentially over time in sub-Saharan Africa specifically Kenya.
The Kenyan government has continued to strategically strengthen the diaspora policies in order to increase the flow of diaspora remittances into the country to boost financial inclusion. In 2020 Kenya invested heavily in mainstreaming labour migration in order to enhance remittances from the diaspora. Meanwhile, over 4 million Kenyans are now living and working abroad as per the census recorded by the end of last year. Authorities in Kenya have signed agreements with Saudi Arabia and Qatar, where at least 75,000 and 50,000 Kenyans are currently working. Also, Kenyan government deploy labours attaches in countries where her citizens get jobs in order to help in ensuring Kenyans are not underpaid and frustrated while working abroad.
Expert says, remittances may be channeled through official or unofficial channels. Official channels involve transfers using the banking system and money-transfer organizations. Unofficial channels involve sending remittances through mainly cash or in-kind transfers through carriers, such as family members, friends or other carriers; money or goods taken by the migrant on his or her seasonal visits to his or her homeland and; funds remitted through unlicensed money transfer operators using traditional networks such as “Hawala”.
The continent of Africa, particularly sub-Saharan Africa remains less diversified in its external resource flows, and depends on official development assistance (ODA) to finance public investment. Innovative finance is crucial to enhance efficiency, but also mitigating volatility in the flow of external resources that characterize the traditional sources, including ODA, according to the AfDB’s December 2010 periodic bulletin “Africa Economic Brief” titled “Diaspora Bonds and Securitization of Remittances for Africa’s Development”. However, sub-Saharan Africa continued its dominance after seeing a significant 43% growth on new accounts in 2020, a GSMA report indicated.
The adoption of modern and advanced technology to facilitate international mobile transfers. Using international remittance transfers through mobile technology reduces costs by eliminating the need for physical branches and personnel to attend to walk-in customers. Unlike the past, Kenyan Diaspora is now able to send money and invest back home through safe, affordable and convenient channels as a result of mobile transactions.
Financial institutions in Kenya have made it easier for people to send cash to mobile money accounts and platforms such as Western Union. Also, innovative tools have been born out of a collaboration of the African telecommunications and banking sector. Safaricom’s M-Pesa platform has an option to receive cash from countries where M-Pesa also operates. All these make it easy for families to send and receive money despite the global health crisis.
Kenyan remittances steadily increased at an average annual rate of 15.8 percent in the past decade, contributing 3.0 percent of the country’s Gross Domestic Product (GDP) when it rose from $934 million in 2011 to an estimated $2.7 billion in 2018. Last year, Kenya was the only country in the sub- Saharan Africa region where remittance inflows have so far been countercyclical to the COVID-19 pandemic disruptions, according to a World Bank October 2020 Brief that provides updates on global migration and remittances. Remittance flows to Kenya increased by 10 percent, from US$2,796 million in 2019 to US$3,095 billion in 2020, accounting for three per cent of the country’s Gross Domestic Product (GDP), corresponding to the Central Bank of Kenya (CBK) data.