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Remittances and the Kenyan Economy 2

23 Jan

A remittance is money sent by a person in a foreign land to his or her home country. Due to the huge sums involved, remittances are now being recognized as an important contributor to the country’s growth and development. Remittances are one Kenya’s largest source of foreign exchange and  they have played a vital role in alleviating the liquidity constraints that would otherwise prevent the state (or households) from investing in important areas like children’s education and housing construction. The Central Bank of Kenya conducts a survey on remittance inflows every month through the formal channels that include commercial banks and other authorized international remittance service providers in Kenya like mukuru.com. Remittance inflows to Kenya increased by 18.6 per cent, from USD 107.5 million in September 2013 to USD 127.4 million in September 2014, and were slightly lower than USD 128.8 million recorded in August 2014.

While the main sources of diaspora remittances to Kenya are from Europe and the United States, Kenyan’s living in other African countries are also attracting interest from Pan African Banks such as West African-based Ecobank Group. The bulk of the money sent goes into household expenditure and supporting investments such as shares and real estate.Currency dealers reckon that the increased flow will help support the shilling.World Bank estimates put total remittances that come through the banking system and unofficial channels such as personal deliveries at over one billion dollars per annum. An increase in the volume of cash remitted by Kenyans working or living abroad has attracted the attention of local and international banks, telecommunication and money transfer firms; all keen to cash-in on this growing segment of the market. This evidences the positive impact on the local economy these remittances have on the local economy. Many have found ways to add on services and and several downstream services have sprung up to allow citizens to get a piece of the proverbial pie.

Security of transfer is a big concern and efforts have more than tripled in a bid to make the transactions safe from various forms of crime. The diaspora remittances business has attracted the attention of Kenya’s monetary authority – Central Bank of Kenya (CBK) – which has already put in place the regulatory framework to monitor cross boarder money transfer activity. Money Remittance Regulations have already been formulated, creating the necessary legal framework for licensing of stand-alone money remittances providers. Companies like mukuru.com have invested heavily in beefing up security to protect all interested parties.

The importance of remittances in the Kenyan economy cannot be underestimated. Kenya’s Vision 2030, the government’s national policy blue print, recognizes the role played by diaspora remittances in national development and therefore highlights diaspora remittances as one of the flagship projects under the financial sector.

 

 
 

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