Kenya Diaspora Indispensable in Development

Remittance home

The Kenyan government has been courting kenyan investors abroad thanks to their pivotal role in economic recovery strategy through direct investments and economic development. Their role in development is crucial in replenishing the national coffers through their remittances.

In Kenya, it is estimated that at least $1 billion is being remitted annuallyup from about $750 million in 2005. Between 45 per cent and 65 per cent of the money is received informally and therefore not captured in official records. They are indeed the top foreign exchange earners.

IMF says that these remittances are now the single largest source of forex ahead of tourism and horticulture in Kenya and, in Sub-Saharan African (SSA) countries, the transfers exceed Official Development Assistance(ODA) from development partners.

Sub Saharan Africa (SSA)

Kenya has emerged second to Nigeria among African recipients of foreign exchange remittances with households headed by women leading beneficiaries of offshore money transfers from individuals. These diaspora kenyans are influencing the macroeconomic variables back home including the exchange rate (Impacting the shilling), inflation rate and interest rates either directly or indirectly.

In absolute terms Kenya, Nigeria, and Senegal are the largest recipients of remittances in the region. Remittances from african diaspora form a quarter of all exports for at least four countries on the continent. For Lesotho, Cape Verde, Uganda, and Comoros, for instance, remittances have since 2000 amounted on average to more than 25 per cent of export earnings. In 2005, remittances to the 34 Sub Saharan Africa (SSA) countries reporting are estimated to have been about US$6.5 billion.

In kenya, the money is largely used by relatives to fight poverty through education and health support as well as investments in real estate and shares listed at the Nairobi Stock Exchange.

Diaspora at NSE

Kenyans professionals and entrepreneurs abroad have continued to play a crucial role in investments back home and for those who wish to return latter and enjoy their hard earn savings there preferred channels of investments has been the NSE and the property market. Infact 40 percent of new home buyers are Kenyans residing abroad acording to real estate developers.

The phenomenal growth of the NSE in the last 3 years and the price rally realized at the NSE last year, 2006, and partly in 2007 has seen many diaspora kenyans also remit their savings for investments in shares and other availabe options at the Nairobi Stock Exchange. Kenya Capital Investments Group is one such investment group that has consistently blogged on their activities and investments at the NSE. As some would say the future of ivnestments therefore lies in investment groups and why not given then feats realized by Trancentury in a span of less than ten years.

SSA vis other countries

Remittance flows to SSA are relatively small, 4 per cent of total remittances to developing countries and just 33 per cent of those to India, which receives the most. In contrast, countries in Latin America and the Caribbean received 25 per cent of all remittances, as did the countries of the East Asia and Pacific region.

Private Public Partnerships (PPP)

In 2006 the mutually beneficial relationship between the Capital Markets, the Government of Kenya and the Private Sector came to the fore with the raising of approximately Kshs. 12.04 billion, through the Initial Public Offerings (IPOs) of Kenya Electricity Generating Company, Scangroup and Eveready and the sale of additional shares in Mumias Sugar Company (MSC). As a result of the IPOs, the number of Central Depository and Settlement (CDS) accounts has increased from 86,820 on February 1 2006 to 634,420 on February 14 2007, a six fold increase. These developments alongside the implementation of Automated Trading System (ATS) has spurred interest at the NSE from locals and diaspora kenyans.

Therefore...

The Kenyan Diaspora has increasingly become an important part of the Kenyan Economy. Through remittance, the Diaspora has become the leading foreign exchange earner for Kenya. This has led to concerted efforts to actively involve them in the economic transformation of Kenya through Kenya diaspora investment forums.

Future Prospects

Experts have estimated that the remittance can be increased to over 3.4 Billion dollars a year if effective investmentment strategies are put in place with the argument being that Kenyans in the Diaspora look for investments elsewhere because investing in Kenya under present conditions is very risky. The report on Kenya Diaspora Investment Forum alongside other concerted efforts ( including Kenyans Abroad Investment Fund-KAIF) to address diaspora needs should be clearly scrutinized and their recommendations implemented.