According to the World Bank, Remittances are “financial or in-kind transfers made by migrants to friends and relatives back in communities of origin”.
The African diaspora is made up of over 30 million individuals who collectively contribute around US$40 billion in remittances to their families and communities annually. Due to its huge population, Nigeria has a massive diaspora community across the world and is one of the largest recipients of remittance flows in the continent ($23.8 billion) followed by Ghana ($3.5 billion) and Kenya ($2.8 billion) based on 2019 figures.
Despite the growing significance of remittances, it is difficult to fully understand the relationship between African migration and remittance flows due to a plethora of factors. For instance, there is a dearth of official statistics on remittance flows to Africa due to the large scale of illegal migration within the continent and the ubiquity of informal remittance channels in the region.
Furthermore, the formal market for money transfers in the continent remains largely underdeveloped and pervaded by several challenges such as low competition, high transfer costs (approximately 9.3%, in comparison to the global average of 7%) and a lack of technological innovation.
Kenya is the third-largest recipient of remittances in sub-Saharan Africa. Also, remittances are the largest source of foreign exchange for the country and it accounts for around 3% of the country’s GDP (based on 2018 estimates).
An estimated 3 million Kenyans living abroad – mostly in North America and Europe- sent approximately $3bn in remittances back home in 2019. The Kenyan diaspora is clearly an important contributor to the East African country’s growth and development.
In a bid to encourage investment and foster formality, the Kenyan government recently introduced a Diaspora Investment Fund which enables Kenyans living overseas to invest in developmental projects in their home country. An investment firm, African Diaspora Asset Managers (ADAM), has been granted the first licence of its kind for the fund by the Kenyan Capital Markets Authority.
The primary objective of the fund is to create a safe and regulated investing body for Kenyans living abroad. Diaspora payments would also be facilitated using Kenya’s mobile money platform M-Pesa, allowing Kenyans to make investments from as little as $5.
Kenyans would be able to use the ADAM mobile application to invest, track and sell units in real-time using bank accounts, Visa cards and M-PESA.
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