Diaspora remittances at $951m all-time high

National Bank has more than doubled its net profit for the nine months to September, aided by cheap deposits and a fall in loan loss provisions. Photo/FILE 

By PETERSON THIONG’O The EastAfrican

In Summary

• Data from the Central Bank of Kenya shows that total remittances rose to $951 million from $876 million last year.
• This is the country’s weakest growth since 2010, chocked by slowing growth in emerging economies, which by extension, has affected the global economy.
• Half the total remittances came in from North America — US and Canada — while those from Europe and the rest of the world accounted for 27 per cent and 25 per cent respectively.

Kenya’s diaspora remittances rose by 8.5 per cent in the year ending September 2013, the slowest annual growth in three years, even though total inflows touched an all-time high.

Data from the Central Bank of Kenya shows that total remittances rose to $951 million from $876 million last year. This is the country’s weakest growth since 2010, chocked by slowing growth in emerging economies, which by extension, has affected the global economy.

“The growth slowed because it was coming off a higher base. In addition, inflows from emerging markets are likely to have decreased as a result of the recent slowdown in these markets,” said Sarah Wanga, a research analyst at investment firm ICEA Lion Group in Nairobi.

Half the total remittances came in from North America — US and Canada — while those from Europe and the rest of the world accounted for 27 per cent and 25 per cent respectively.

“North America’s dominant position is a reflection of the large number of Kenyans engaged in gainful economic activities there,” said the CBK in its latest monthly economic update.

The growing number of Kenyans moving abroad — especially to the Middle East — as well as an estimated three million already living broad, are partly the reason for the surge. The CBK also said improved data collection techniques reflected by better classification of remittances data by commercial banks also explains the rise in the inflows.

Total remittances have been rising steadily over the years, from about $300 million in 2006 to about $1.7 billion as at the end of last year.

READ: Diaspora remittances to Kenya up by 31pc

Emerging markets

Emerging markets have been the biggest driver of global economic growth, accounting for about 80 per cent of the total.

Remittances are important to Kenya as they are the largest source of foreign currency and provide the biggest cushion against the country’s exchange rate. The inflows are also integral in supporting growth especially by triggering consumption.

“Large amounts of remittances find their way into real estate, building and construction which has increased the demand and prices in the non-tradable sector,” said the World Bank in a report on the Kenyan economy released last Tuesday.

The inflows into the real estate sector have pushed up demand for houses in the country. The Wealth Report 2013 by property consultancy firm Knight Frank shows average property prices in Nairobi’s high-end estates rose by 10 per cent last year, placing Kenya’s capital in position 11 out of 80 cities surveyed.

A similar report released last year showed property prices in Nairobi and the coastal region increased by double-digits, earning the two regions first and second positions respectively of 71 cities surveyed globally.

The key challenge for growing remittances remains the cost of sending money. The International Monetary Fund estimates that the cost of sending money to Africa is as high as 10 per cent of the principal amount. The figure is higher than the global average of 8.96 per cent and nearly twice the cost of remitting money to South Asia, which had the world’s lowest prices at about six per cent.