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Notwithstanding household inflationary pressures, the World Bank and industry stakeholders now claim that lowering the cost of sending money remains a crucial driver in boosting diaspora remittances this year.
Remittances are expected to decrease this year by 1% as a result of deteriorating conditions in the countries where migrants are going, according to the international lender. Sending $200, for example, to Sub-Saharan Africa, which includes Kenya, costs 7.8% of the total amount, down from 8.7% the year before.
Remittances from nations in the least costly corridors are on average 3.4%, while those in the most expensive corridors are on average 25.2%.
Remittances to Sub-Saharan Africa, the region most affected by the global crisis, increased by an estimated 5.2% last year to $53 billion (Sh6.96 trillion), up from 16.4% the year before, according to the World Bank's report. The growth was primarily attributable to strong flows to Nigeria and Kenya.
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Costs must be brought down in order to increase the number of remittances. Remittances from the diaspora did nothing in February to help the nation's dwindling foreign exchange reserves, which have subsequently fallen to a 10-year low.
Weekly data from the Central Bank of Kenya (CBK) shows Kenyans living and working abroad sent home $309.2 million (Sh39.9 billion), 3% lower than $349.4 million (Sh45 billion) the previous month.
Since July of last year, this is the lowest revenue. The World Bank regulator did not provide explanations for the reduction, but analysts are attributing it to the challenging global economic environment, where high inflation is pinching disposable income.
Nevertheless, compared to $3.8 billion (Sh490.2 billion) in February 2022, the cumulative inflows for the 12 months ending in February 2023 were $4.03 billion (Sh520 billion).
"The remittance inflows continue to support the current account and the foreign exchange market. The US remains the largest source of remittances into Kenya, accounting for 59%,'' CBK said.
At the height of the epidemic, international transfer costs were reduced by global payment companies like WorldRemit, making it more affordable to send money to 450 of its busier corridors in Africa. According to the business, the cheaper pricing allowed clients to transfer more to friends and family in Kenya and other African regions using the mobile app or website.
According to the company's data, remittances are mostly used in Kenya for domestic, medical, and educational expenses. "Migrants’ resilience and commitment to their loved ones back home has proven to be vital, especially in a period where household expenses are increasing around the world,” World Remit notes.