Unlocking The Potential Of Data: Transforming Diaspora Remittances In Kenya

In an era where data reigns supreme, a profound shift is reshaping the landscape. What was once an elusive resource, confined to a few entities in fragmented pieces, has undergone a revolution powered by technology. The result? Accessible, consolidated information that unveils the hidden trends shaping our daily lives. Take, for instance, the scenario where a family member abroad sends money back home. The Central Bank of Kenya (CBK) now possesses this knowledge, thanks to its oversight of the banking sector.

The estimated annual inflow of approximately $400 million resonates with this pattern. As a result, this sector has garnered considerable attention, positioning it to rival Kenya’s traditional foreign exchange pillars—tea, coffee, horticulture, and tourism.

Both governmental bodies and private enterprises have turned their gaze towards this burgeoning sector. A surge of innovation is underway to birth technological solutions that not only unveil the nuances of remittance trends but also facilitate efficient reinvestment into the domestic economy.

Uganda Spearheads Kenya’s Diaspora Dollar Inflow money Dwindling American Economy Casts a Pall over Diaspora Remittances Marking an unprecedented leap forward, the Kenyan diaspora commands the realm of digital remittances to mobile accounts. This monumental technological leap underscores the sector’s evolution.

On the continental front, Kenya ranks fifth in terms of remittance value sent back by its expatriates. Data furnished by the CBK reveals a remarkable 44% surge in the 12-month average of remittances, scaling from $240 million in December 2019 to $345.9 million by June 2023.

This backdrop set the stage for Nairobi to host the Global Forum on Remittances, Investment, and Development Summit in 2023. The world’s attention converged on this event, seeking insights into harnessing technological investments to slash costs and bureaucracy tied to remittances. The Kenyan experience held key lessons on extending financial transactions to the last mile.

With one in every eight individuals directly engaged in remittance transactions and a significant portion dwelling in rural locales, the summit convened thought leaders from across the globe. Their mission: crafting actionable strategies to boost diaspora remittances and investments while fostering economic growth.

In most nations, the remittance process remains fragmented, leading to escalated costs for senders who navigate complex jurisdictional routes, each with its compliance requirements. This convoluted landscape shrouds transactions in obscurity, thwarting policy streamlining efforts.

The scarcity of data further handicaps cross-border service providers, impeding the adoption of uniform legal, technological, and financial standards.

A prominent issue highlighted at the three-day summit was the dearth of comprehensive global remittance data, impeding effective policy formulation. In Kenya, however, the significance of data is indisputable; it fuels policy decisions and guides investments across the value chain. Kenya, alongside Italy and Uganda, was lauded for meticulous central banking that yielded granular remittance data.

A December 2021 CBK survey underscored how data can be transformed into actionable insights, directing resources toward locations, demographics, and targeted diaspora investments, streamlining cash flows.

The survey unveiled the diaspora’s most frequented locations: over a fifth of Kenyans reside in the United States, with the United Kingdom and the United Arab Emirates following suit. The average duration of their overseas stay stood at about a decade. Impressively, more than half of Kenyan expatriates boasted extensive education—26% held a Bachelor’s degree, and 34% held a Master’s degree.

These insights spotlight Kenya’s diaspora community as a wellspring of long-term investment capital, especially pertinent in an era of global risk aversion. The Kenyan financial system adeptly leverages this knowledge to devise cost-effective solutions catering to the diaspora’s needs.

At Credit Bank, our collaboration with the International Finance for Agriculture (IFAD) has birthed a gateway bridging Kenyan expatriates and their rural relatives. Partnerships with rural savings and credit cooperatives (saccos) have reduced the cost of remittances to rural areas dramatically.

Accurate data empowers us to price our services optimally, as evidenced by nearly half the respondents indicating an average monthly remittance of Sh75,000. The demographic insights derived from this data also aid in expediting the transfer process to remote locales.

Notably, only six African countries currently publish data at this level of detail. Urgency mounts to develop data repositories that consolidate information across jurisdictions into a regularly updated platform.

Data analytics serves as the bedrock for informed policy decisions in central banks and informs innovative solutions deployed by financial service providers. While the CBK has made commendable strides in data collection, substantial work remains to further slash costs and enhance the utilization of diaspora investments.