Kenya is looking at ways of growing remittances to finance development projects.
The government is availing opportunities to enable remittances to be invested directly into Big 4 Agenda projects. There are plans to issue a diaspora green bond in which Kenyans working and living abroad can invest in affordable housing, food security, manufacturing and affordable healthcare.
The funds could also be channelled to agribusiness and value addition while negotiations are ongoing to channel investments into healthcare facilities such as cancer centres.
“For all these to be actualised, the government needs to put in place pro-diaspora policies to attract their assets,” said Shem Ochuodho, Kenya Diaspora Alliance convenor.
He added that with the right policies, Kenyans abroad can mobilise the $3.5 billion required to finance the standard gauge railway phase 2B from Suswa to Kisumu in a span of three years. The project is in limbo after China declined to fund it.
Central Bank of Kenya governor Patrick Njoroge attributed the narrowing of the current account deficit to 4.6 per cent of gross domestic product in 2019 from five per cent in 2018 partly to the resilient diaspora remittances. The funds have also contributed to expanding reserves that stood at $8.4 billion amounting to 5.2 months of import cover by end of January.
Although the CBK projects remittance inflows to stagnate in the coming years, it is encouraging Kenyans living abroad to invest directly in projects contributing to economic growth at the micro level.
“With time we expect stabilisation in remittances but an increase in Kenyans abroad investing in government securities,” said Dr Njoroge at a post-Monetary Policy Committee press briefing recently. Currently, remittance investment in government securities is nearly non-existent.
To make it easier for Kenyans in the diaspora to invest in government securities, CBK is focusing on lengthening the maturity period of treasury bonds (T-bonds).
T-bills have a maturity period of 91 days, 182 days and 364 days, while the maturity range of T-bonds is between five and 30 years.
Most Treasury bonds in Kenya have a fixed rate — meaning the interest rate determined at auction is locked in for the entire life of the bond — making them predictable and long-term sources of income that offer interest payments every six months.
Currently, KDA says that 75 per cent of remittances are spent on family consumption — food, education and medical services. The remaining 25 per cent is invested in different pools including real estate, land, stocks and savings.
“There is a lack of structured strategy for tapping remittances, that’s why people in the diaspora mainly invest in real estate,” Dr Ochuodho told The EastAfrican.
World Bank data shows remittances have been on a steady rise in the region increasing from $388 million to $421 million over the same period in Tanzania. From $1.5 billion in 2015 to $2.8 billion in 2019 in Kenya, accounting for 2.9 per cent of GDP; while in Uganda they have surged from $902 million to $1.5 billion and in Rwanda from $159 million to $276 million.
In South Sudan and Burundi, however, remittances have plunged from $1.1 billion to $211 million and from $51 million to $31 million respectively over the same period.