Leveraging the impact of remittances to spur inclusive development in Kenya
Recent data from the Central Bank of Kenya (CBK) indicate that in 2020, Kenya’s half-million migrants sent US$3,095 million, accounting for 3 per cent of the country’s GDP. “Cumulative remittance inflows increased to US$3,094 million in 2020 from US$2,796 million in 2019, an increase of 10.7 per cent. Several other countries as diverse as Comoros, Gambia, Mexico, and Philippines joined Kenya in bucking the predictions with increased remittances in 2020” said Dr. Patrick Njoroge, Governor of CBK at the National Remittance Stakeholder Network (NRSN) event organized by IFAD. The event brought together national stakeholders who work to support remittance markets and promote financial inclusion as a key development outcome.
“The rapid acceleration of digitalization has been the “silver lining narrative” of the pandemic. Remittances have been one of the key beneficiaries of digital transformation as members of the diaspora sent funds to their loved ones back home to ride out the ravages of the pandemic,” added Dr. Patrick Njoroge.
Today it costs more to send remittances to Kenya from other African countries, including Tanzania, South Africa, and Rwanda, than from Germany, Canada, and the USA. While the adoption of technology and the integration of mobile phone financial services in the remittance ecosystem have lowered costs over the last 10 years from over 15 per cent to the current 8 per cent in Kenya, it is far behind the Sustainable Development Goal (SDG) 10.c objective of reducing transfer costs to 3 per cent. The global average stands at 6.51 per cent in Q4 2020. Overall, cash-based remittance services are more expensive at 8.3 per cent as compared to digital transfers at 7.6 per cent.
Most remittances received in Africa cover daily needs, with a significant amount (25 per cent) available for savings or investment. A recent study released by IFAD showed that bringing more innovative solutions to access and use these funds can dramatically increase the financial resilience of receiving families in these challenging times. It also showcased specific actions necessary to safeguard the responses and recovery to the COVID-19 crisis.
To engage effectively, and spur innovation in the marketplace, IFAD also launched a call for proposal in the context of its Platform for Remittances, Investment and Migrants’ Entrepreneurship (PRIME) Africa programme in collaboration with the European Union. Through this initiative, IFAD and partners aim at identifying and supporting initiatives that reduce transaction costs, accelerate digitalization, leverage remittances to deepen financial inclusion, and expand formal channels.
‘What the remittance market needs now are good practices and innovations that could offer digital solutions and financial services to the remittance families to enhance their recovery and resilience’ said Pedro De Vasconcelos, Manager of IFAD’s Financing Facility for Remittances in line with the 2021 theme of the UN-adopted International Day of Family Remittances (IDFR), every 16 June.
‘As we plan for recovery we need to account for the fundamental contribution of over 200 million migrants across the globe who – through remittances – support their 800 million family members, securing a better future and greater opportunities’ said De Vasconcelos. In this modern economy, remittances represent the human face of globalization and the international community needs to work together to ‘not only make it cheaper but also to make it count more for millions of families and the communities where they live.’