An initiative to help Kenyans in the diaspora channel their remittances into development projects without fear of misappropriation has been launched.
InverstorQ Capital Limited has entered into partnership with Equity Bank, National Bank and the Kenya Community Abroad to create a Diaspora Unity Fund that will see more money go to key projects rather than to meet basic needs of the beneficiaries.
The initiative will also cut down the cost of remittances currently dominated by the multinational.
"With the new programme, we shall be able to cut down the transfer cost from the current 15-20 per cent of the value of the money to less than seven per cent," the general manager of the InvestorQ Mr Allan Ogendo said.
The cost is very high due to the existing licensing regime, which has both the primary and secondary licensed operators.
Kenyans abroad last year remitted $ 1.6 billion, most of which did not end up in the production sector, Ogendo said.
Money transfers from the diaspora have now become one of the leading sources of foreign exchange, raking in Sh132 billion and outpacing tourism at Sh62 billion last year, a traditionally leading foreign exchange earner.
This makes diaspora cash a goldmine for any economy, especially poor and emerging ones.
The World Bank says in its 2008 report that, globally, around 300 billion dollars is repatriated back to ancestral homes annually, around $14.5 billion by African migrants.
But these remittances are sent to countries of origin for short-term assistance, in order to meet family needs such as food, health and education.
A minor part of these funds contributes directly to the development of economic activities such as building houses or funding income generating activities.
The Kenyans abroad money transfer initiative, Ogendo said, was licensed about two months ago by Capital Market Authority.
Since the transmission is supposed to go through a deposit channel, there was need to partner with Equity Bank as a custodian of the fund.
"National Bank of Kenya will play an oversight role to see that everything is done above the board," Ogendo said when he addressed delegates in Mombasa attending the Kenya Institute of Management (KIM) leadership and management convention held last week.
A local money transfer system to play the role currently played by international money transfer firms such as Western Union has also been created.
"Tangaza will be partly owned by the Kenya community abroad who will hold 20 percent of cash transferring processes," Ogendo said, adding that multinational firms do not consider Kenya market significant due to the huge volume they handle in other parts of the world.
According to Ogendo, the initiative is targeting 30 percent of the transfer after one year and 50 percent during the second year.
He said the programme was supported by an ICT platform through which the investors abroad will be able to track their investment portfolio either in property or money markets through the software.
"In the past, many investors have appointed agents to initiate investment in the country with some not giving the actual picture of the situation on the ground," Mr Ogendo said.
Equity Bank, according to Michael Wachira, the bank's director of treasury, trade, finance and marketing, has already created a department to handle the issue of remittance.
Beginning 2007, Kenya ranked second in terms of the value of remittances.
Nigeria was first with $3.3 billion and Sudan third with $ 1.2 billion.
Senegal and Uganda received $900,000 million each according to the World Bank report titled Migrations and Remittances Fact Book 2008'.