Diaspora remittances can fund ‘Big 4’ affordable housing plan

Kenyans in the diaspora have become the largest single source of foreign exchange. PHOTO | FILE

What you need to know:

  • The historic March 9 handshake between President Kenyatta and opposition leader Raila Odinga could also have played a part.

  • Kenya should develop innovative models for attracting and utilising remittances in key areas of economic development.
  • The impact of the remittances on economic growth should be seen in relation to how much Kenya borrows from international agencies.
  • The Kenyan diaspora would team up with banks, developers and the government to contribute to the plan for developing at least half a million houses in five years.

Kenyans in the diaspora have become the largest single source of foreign exchange — bigger than the annual development assistance from the largest foreign aid agencies or forex earnings from tea, horticulture or tourism.

In the first three months of this year, they remitted more than $640 million (Sh64 billion), according to the Central Bank of Kenya, over half of it from North America and 30 per cent from Europe.

The volume of remittances shot up from the previous $185.5 million high in October to over $200 million monthly since December for a record $222.2 million in March.

The higher inflows could reflect the improved business confidence following President Uhuru Kenyatta’s victory in the October 26 repeat presidential election, ending the uncertainty that engulfed the country when a split Supreme Court nullified the August poll results.

HANDSHAKE

The historic March 9 handshake between President Kenyatta and opposition leader Raila Odinga could also have played a part.

Should the trend continue, remittances could rise from $1.95 billion (Sh195 billion) in 2017 to a record $2.5 billion (Sh250 billion) in 2018 — a 25 per cent rise.

The size of remittances to gross domestic product (GDP) might rise from 2.7 per cent to 3.5 per cent in a year. Significantly, the volume could double from Sh113 billion in 2013.

The impact of the remittances on economic growth and social transformation should be seen in relation to how much Kenya borrows from international development agencies. In just five months, from November to March, Kenyans abroad have sent in more money than the entire $1 billion (Sh100 billion) that the World Bank lent Kenya for the North and North-Eastern Development Initiative (Nedi) launched last week.

The term of the loan is five years; hence, the bank’s commitment for this initiative is $200 million a year — less than what Kenyans remit in a month.

STABILITY

The Kenyans send money back home for many reasons. Besides family support, they have significantly invested in real estate sector, contributing to the growth of affordable housing. Given the volume and stability of the remittances, the government should establish formal mechanisms of channelling the diaspora funds to the ‘Big Four’ agenda.

The viable option is to develop a dynamic public-private partnership model. The Kenyan diaspora would team up with banks, developers and the government to contribute to the plan for developing at least half a million houses in five years.

The government needs to provide an incentive structure to improve return on investment by reducing the transactional costs and risks the Kenyans suffer at the hands of relatives and schemers.

COORDINATION

That needs meticulous coordination between the diaspora, the Ministry of Housing and all the housing agencies. The Ministry of Foreign Affairs developed a Kenya Diaspora Policy in 2014 and established a diaspora directorate to facilitate the contribution of the remittances to development. The directorate needs to be energised to play a more active role in tapping Kenyans across the world, advising them on available opportunities and helping them to maximise returns in safe, secure investments.

Kenya should develop innovative models for attracting and utilising remittances in key areas of economic development and reducing dependency on heavily leveraged and tied development assistance.

IMPACT

By the time Nedi makes an impact on communities in the frontier counties, Kenyans abroad will have built a million houses, stimulating economic opportunities and jobs for the youth. 

A shift in official thinking, to more private investments and less aid, would also ease Kenya’s debt burden, now clogged by commercial debt and unfavourable aid from bilateral and multilateral lenders.

 Mr Warutere is a director of Mashariki Communications Ltd. [email protected] 

Welcome!

You're all set to enjoy unlimited Prime content.