3 August 2014

Kenya: Remittances Inflow Up By 10 Per Cent in Six Months

Kenyans living abroad are on course to retaining the top position as the biggest source of foreign exchange for the second year running ahead of tea, tourism and horticultural receipts.

The Kenyan diaspora sent home $690.1 million (Sh60.62 billion), 10.6 per cent increase compared to $623.7 million (Sh54.78 billion) remitted in the first half of last year.

Latest Central Bank data however showed that June remittances were three per cent lower in June at $116.1 million (Sh10.20 billion) than the historical high recorded in May at $119.7 million (Sh10.51 billion).

North America, mainly the US and Canada, remained the main source of inflows, accounting for 45.5 per cent of the total or Sh4.64 billion, although this was a slight 6.6 per cent drop from May's Sh4.97 billion.

Europe's share was Sh2.82 billion or 27.7 per cent, while those living in the rest of the world sent in Sh2.73 billion or 26.8 per cent of the total.

CBK said remittance inflows "remained resilient" in the 12 months to June 2014, with the cumulative flow posting a 13.2 per cent to Sh119.3 billion from about Sh105.24 billion in the year to June 2013.

"The 12 month average flow during the same period sustained an upward trend to peak at $113.1 million (Sh9.93 billion) from an average of $99.9 million (Sh8.78 billion)," it said in the statement.

While the two top foreign exchange earner sectors have continued to struggle this year on lower prices and persistent insecurity incidences, remittances have remained strong.

Remittances hit a historic annual high in 2013, climbing by 10.3 per cent over 2012 to Sh113.31 billion ($1.29 billion), and surpassed dwindling tea and tourism receipts.

Earnings from tea exports slumped 15.5 per cent to Sh94.6 billion in 2013 while income from tourism also dipped 2.1 per cent to Sh93.97 billion.

The impact of the remittances on economic growth is however less than that of tea, tourism and horticulture. This is because the lion's share of inflows goes into social sectors whose contribution to the Gross Domestic Product is considered lower.

"Most of it goes into helping their families pay their bills like school fees. Only a small portion is directly invested, mainly in real estate and stock market," Moses Waireri, head of research at Sterling Capital, said on Friday.

Policy makers have been under the spotlight for inadequate investment instruments for the diaspora community. Some have in the past suggested creation of foreign currency savings and investment vehicles like dollar-denominated unit trusts and money market funds.

A 2010 survey by the World Bank established an average of 52 per cent of the burgeoning inflows ends up paying consumption bills with only 36 per cent being invested in small businesses.

Eight per cent is invested in real estate while the remaining four per cent goes into savings.

CBK governor Njuguna Ndung'u said on Thursday that seven fully-fledged remittance firms have been licensed since the money remittance regulations were enforced last year.

The agencies have handled an estimated Sh1.76 billion ($20 million) remittances inflows and Sh2.37 billion ($27 million) in outflows, he said. Ndung'u decried the high cost of transactions estimated at 11.55 per cent of the total remittance value.

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