This week, the Central Bank of Kenya released the results of the first-ever Diaspora Remittances Survey (the “Survey”). The Survey was conducted between March and May 2021 by the Central Bank of Kenya in collaboration with the Kenya National Bureau of Statistics and the Ministry of Foreign Affairs to collect information to improve the quality of remittance statistics. It attracted 1,321 respondents, targeting Kenyans working/living abroad who had sent remittances to Kenya in 2019.
Among the key findings of the Survey include half of the total remittances being allocated to investment in real estate for recipients, mortgage payment for senders, and purchase of food and household goods.
The Survey also confirmed the importance of mobile money operators and money transfer companies, in addition to banks, as the main channels for cash remittances. Further, the Kenyan diaspora prefer digital service providers due to convenience, promptness, and ease of access. On average, recipients receive remitted funds on the same day, reflecting the efficiency of these channels.
Key problems that were identified included the high cost of remitting cash and the inadequate information on investment opportunities in Kenya for the remitters.
Below is a summary of the results of the Survey.
Socio-demographic characteristics of respondents
The Survey indicated that Kenyans in diaspora left the country mainly searching for jobs and pursuit of higher education. Across the regions, the Survey finds that the respondents left for Europe, North America and Oceania in the quest for higher education while those in Asia and African countries mainly left in search of employment.
The majority of respondents indicated they sent cash monthly, while a small proportion sent it weekly and quarterly. Most of the remittances were sent to support recipients in the purchase of food and household goods, offsetting medical expenses, meeting education expenses, payment of rent and household utilities, payment of costs associated with ceremonies, clothing needs of the recipient, and to meet farming needs.
Slightly over half of the cash remittances were allocated to three uses: investment in real estate (land and building) for recipients, mortgage payment for senders and purchase of food and household goods.
The majority of the respondents used mobile money operators, money transfer companies and banks. Hence, a large proportion of remittances are through formal channels. However, a small proportion of the respondents personally carried the cash, sent through friends/relatives or used Hawala operators.
M-PESA/Safaricom was the most preferred service provider, followed by banks, WorldRemit, Wave, Sendwave, and Western Union. Respondents cited convenience, speedy service, ease of access and favourable transaction charges as the main reasons for using these service providers.
On average, the cost of sending funds was in the range of 4 – 5 percent of the amount remitted while using the most dominant and preferred service providers.
A large proportion of the respondents cited the cost of remitting as the major challenge, followed by hidden charges and transfer time. Other challenges cited by respondents include unfavourable exchange rates applied by service providers leading to high conversion costs, limits on amounts that can be remitted through mobile money operators, limited interoperability of mobile money systems and slow interbank transfers.
About 30 percent of the respondents sent in-kind remittances in 2019. Europe, North America and Asia accounted for most of the in-kind remittances, which included clothing/shoes, medicines, household and electronic goods. These were remitted through the respondent travelling with the goods while on trips to Kenya, carried by relatives/friends of the respondent, courier companies, transport operators and the Postal network. Reasons cited for using these channels included convenience, safety and security of the items and favourable cost. For in-kind remittances, the average cost of remitting using various channels was established to be in the range of 15 – 27 percent of the value of the item sent.
Investment opportunities in Kenya
The respondents acknowledged being aware of land/real estate, stock market, and government securities on investment opportunities in Kenya. Investment information was accessed through family and friends, diaspora associations, financial service providers and Saccos. Nonetheless, the respondents cited challenges of accessing investment information, including misinformation and untimely and fragmented information which comes at a high acquisition cost.
Impact of Covid-19 on remittances
Despite the disruptions caused by the COVID-19 pandemic, most of the respondents continued to provide support in cash to family members and friends/relatives who reside in Kenya whose financial demands increased in 2020. A net analysis of the effect of the pandemic on amounts remitted indicates that while senders in Asia, Europe and Latin America remitted less, the converse was the case for remitters in East Africa, North America and Oceania. The pandemic appears not to have affected the cost of remittances nor access to financial services. On expectations for 2021 remittances, the majority of the respondents expect to remit more.