Kenya tackles headwinds backed by robust remittances

Kenya’s economy is largely driven by agriculture and tourism. Struck by a drought in 2017, Kenya was grappling with headwinds in order to sustain its economy. The Kenyan shilling took a severe beating. The Central Bank of Kenya was hard at work to keep the economy and the currency afloat. The only beacon of hope for Kenya during those difficult months was the remittance inflow from Kenyans living and working abroad. Robust remittances ensured that the economy was cushioned against the myriad economic challenges that the country faced. 

In 2017 diaspora remittances eclipsed revenue generated from tea, coffee and tourism and went on to become the highest foreign exchange earner for Kenya. This reflects the solidarity of the Kenyan diaspora when their country was in the midst of an economic crisis. In its own unique way Kenya has exemplified how remittances have the intrinsic potential to not only support individual household consumption but also sustain an economy, when the need arises. Between March 2017 and March 2018 Kenya witnessed a 51% growth in remittance inflow. According to Central Bank of Kenya (CBK) data, diaspora remittances peaked $222.55 million in March 2018 compared to $147.52 million in March 2017.

The remittance inflow into Kenya positions the diaspora community as a key enabler in the country’s economic growth story. In 2015 a Diaspora Policy was launched to harness the expertise and investments of the expat population to transform the economy of Kenya. The changing face of a country’s landscape is evidence of a boom in the infrastructure and realty sector. Kenya has undergone rapid urban development and population explosion across various counties. Kisii, one of the most rapidly developing counties in Kenya has witnessed a sea change owing to a surge in construction of residential and commercial units, schools, hospitals and hotels. The Kenyan diaspora are estimated to have pumped millions of shillings into the realty development of Kisii. The Kenyan diaspora has been the primary force behind funding the real estate sector. Keeping in mind the diaspora’s interest in the real estate sector, the government has provided first-time home buyers an exemption on the Stamp Duty Act. Proactive efforts have been made by the authorities to ensure the diaspora streamline their investments into the Kenyan market.

As Kenya edges closer to its Kenya Vision 2030, the country heavily relies on its diaspora population to drive investments in core sectors of the economy like education, financial services, Business Process Outsourcing (BPO), manufacturing and tourism. The economy aims to leverage the entrepreneurial ambitions, sophisticated skill set, technical know-how and industry expertise of the diaspora to position Kenya on the global horizon. Clearly, remittances and the diaspora community wield the power to steer an economy in a direction of unprecedented growth and development.

The government of Kenya must be duly credited for recognising the untapped potential of the diaspora and introducing initiatives to reach out to its evolving expat community. Remittances form the basic source of sustenance for a lot of households in Kenya. The government and financial institutions have launched profitable investment channels to attract streamlined funds from the Kenyan community abroad. The broader perspective of such an approach is to benefit the diaspora on an individual level while simultaneously effecting economic growth within Kenya. Some of the most credible financial institutions in Kenya have a dedicated Diaspora Banking Centre which focuses on developing lucrative options designed for the diaspora audience. The introduction of tax rebates and incentives on investments made by the diaspora could lead to a positive impact on the overall well-being of the Kenyan economy. 

Despite being a gargantuan industry worth $613 billion, remittances often tend to be overlooked as a mere slice of the financial sector pie. This article is a gentle reminder that collectively remittances are capable of keeping an economy buoyant in times of adversity. History has been witness to many instances where substantial remittances from the diaspora have helped entire nations rebuild themselves despite being ravaged politically, financially or by the invincible forces of nature.