Diaspora remittances rise to Sh14bn in August on weak shilling

Money Markets

The Central Bank of Kenya building in Nairobi. PHOTO | FILE 

By GEORGE NGIGI

In Summary

• Diaspora remittances increased by 3.2 per cent to Sh14 billion compared to Sh12.9 billion sent in August last year.
• Diaspora remittances have risen to become the country’s major foreign exchange earner.

Kenyans working in the diaspora sent home Sh14 billion in August as they sought to take advantage of the weak shilling.

Data from the Central Bank of Kenya (CBK) shows that diaspora remittances increased by 3.2 per cent to Sh14 billion compared to Sh12.9 billion sent in August last year. The amount was also higher than the Sh13.7 billion sent in July.

“The improvement reflected inflows from North America and Europe,” said CBK.

The Kenyan shilling has lost 14 per cent to the dollar since the beginning of the year, making it more attractive for persons holding the greenback to send money home.

Those in North America sent home Sh6.7 billion up from Sh6.4 billion in July. With inflation average at an estimated six per cent, the depreciation of the shilling ensures that those with the dollar posted inflation beating returns.

Diaspora remittances have risen to become the country’s major foreign exchange earner. Previously, they were ranked fifth behind tea, horticulture, coffee and tourism but a rise in attractive investments has seen more Kenyans working abroad invest back home, especially in the real estate sector.

READ: Kenya leads Africa diaspora cash growth on mobile money

The production of tea and coffee has taken a dip as poor returns saw farmers, especially in central Kenya, move on to more rewarding ventures such as real estate.

The government is now paying more attention to the needs of the diaspora population. Recently the Ministry of Foreign Affairs came up with a diaspora policy paper.

This year’s diaspora conference was attended by President Uhuru Kenyatta, a huge contrast from the low key function it was two years ago. The President has also made an effort to address the Kenyan population in different countries he visits.

The government’s policy paper seeks to regulate the cost of sending money into the country while protecting the investments of those in the diaspora.

Commercial banks have been aggressive in pushing for more business from the diaspora community leading to more innovativeness and reduction in commissions.

The remittances provide the banks with cheap source of deposits, foreign currency and earns them transactional income.