Banking on Diaspora Remittances To Boost Growth30th Jun, 2018
Various stories abound of Kenyans in the Diaspora who made elaborate plans to invest back home, and, trusting in relatives or friends to get the job done, ended up ruing the day they made that decision.
Kenyans have powerful cultural ties that they never seem to give up. We love our families and extended families such that even while working in other parts of the world, we always keep an eye on what is happening back home.
The statistics bear us out.
Data released by the Central Bank of Kenya (CBK) showed that diaspora remittances reached $222.55 million (Ksh 22.25 billion) in March 2018, a growth of 51% per cent compared to $147.52 million (Sh14.75 billion) the same month last year.
Information from the report shows that remittances as a share of GDP stabilized at 2.3 per cent over the 12 months to March 2018, underlying the fact that Diaspora remittances have become a key support of the shilling which is under pressure due to low export earnings.
It is important to recognize that the diaspora community is a major enabler towards economic growth and a critical driver towards the achievement of our overarching vision of an economically sound East African community.
The East Africa region receives about $ 3.5 Billion annually. This is a big contribution which we believe will continue growing substantially in the coming years on the back of continued investments by the government and institutions like us to facilitate the Diaspora communities. In Kenya, remittances account for 4% of GDP.
Over the past few decades, the Diaspora population has become more prominent on the world stage. This puts it at a very unique position to contribute to boosting the economic growth and prosperity of our country. With our growing consumer markets, the consciousness of return and the synergies for growth, dignity and freedom, we are poised to enter into the league of the Asian Tigers.
Kenya is working to ensuring that Kenyans in diaspora can efficiently invest back at home. A few years ago, the government launched a Diaspora Policy that guides us in harnessing the wealth and expertise of Kenyans in the diaspora to our development efforts. The policy is pegged on five pillars – economic diplomacy, peace diplomacy, environmental diplomacy, cultural diplomacy and Diaspora diplomacy. The core of the economic diplomacy pillar is the search for a robust and sustained economic growth as envisaged by Vision 2030.
With the booming real estate industry, this is usually the first point of call considering the opportunity that comes with the surge in urban development and population growth. Funding from the diaspora has spurred rapid growth in the real estate sector, making it one of the fastest growing sectors according to the latest Economic Survey from the government.
The rising remittances have provided a useful source of foreign exchange for the country, helping raise reserves as well as maintaining the stability of the shilling.
Research has found that increasing remittances lead to reduced poverty, enhance human and economic development since it provides income for households, education, health care, housing, small businesses and farming. Recipients of these remittances tend to put more money into these sectors than those who do not receive any.
Additionally, technological advances have made remittance transactions faster, cheaper and more convenient, making it possible to reach even the “last mile” of many remote areas.
As people continue to cross borders seeking better opportunities for themselves and their families, financial investments back home have been made easier by improved communication technologies.
The infrastructural development such as the Standard Gauge Railway play a significant role in alleviating poverty in their domicile countries and beyond. It also offers a chance for individuals to become an integral part of transforming Africa.
Our economy flourishes from billions of shillings remitted each year by Kenyans either working or studying abroad owing to Kenyans’ enhancing their connection with what happens on the ground back home.
To leverage the impact of remittances for both the individual families and their communities while curbing skepticism that may limit their prospects in making investments back home, the banking industry is providing solutions that facilitate secure and profitable investments effortlessly with guidance from experts.
There are mortgage propositions for example that cover access to property developers and agents by linking interested home owners with vetted property developers and agents to ensure that the journey to home ownership is stress-free. Additionally, there are multi-currency home loans with added value in the form of project management of construction projects at reasonable costs.
Spurring development in the country is a prerogative of all Kenyans and this is being enabled by expanding access to the financial system, thereby providing recipients with more options to save, invest, and use their remittances productively.
Indeed, the realization has now hit that diaspora remittances can have transformative effects on their livelihoods and communities, with well-invested funds stimulating employment and income generating opportunities.
Partnerships hold the key to realizing the growing scale and potential impact of diaspora remittances by reducing costs and saving time while creating a gateway to financial inclusion.
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