Kenya’s top grossing commodity: The diaspora
In a remarkable turn of events, Kenya's economy is now relying more on diaspora remittances for foreign exchange than its traditional sources of income, such as coffee, tea, and horticulture. To understand this shift, CNBC Africa’s Murungi Sarah spoke to Agnes Gitau, the Eastern Africa Association's Executive Director for the UK and Europe.
Fri, 03 Feb 2023 10:45:17 GMT
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AI Generated Summary
- Diaspora remittances have become a crucial source of financing for Kenya, with the country receiving substantial funds from Kenyans living abroad, primarily from the US, UK, and Northern Europe.
- Government policies and constitutional amendments have facilitated diaspora engagement and participation in national processes, contributing to the growth of remittance inflows.
- Leveraging diaspora remittances for infrastructure development, job creation, and entrepreneurship presents a significant opportunity for African countries to address critical financing gaps and stimulate economic growth.
In a remarkable turn of events, Kenya's economy is now relying more on diaspora remittances for foreign exchange than its traditional sources of income, such as coffee, tea, and horticulture. To understand this shift, CNBC Africa’s Murungi Sarah spoke to Agnes Gitau, the Eastern Africa Association's Executive Director for the UK and Europe. Gitau highlighted the significant impact of diaspora remittances, indicating that Kenya is the third-largest recipient of such funds. In the previous year, the country received approximately $4.07 billion from Kenyans living abroad, a testament to the crucial role played by diaspora communities in supporting their homeland. According to Gitau, the United States, the United Kingdom, and Northern Europe are among the major sources of these remittances. The consistent flow of funds from diaspora members has become a lifeline for many back in Kenya, as they contribute to essential needs such as healthcare and education. The challenges faced in the home country often prompt diaspora members to send financial support, underscoring the vital role they play in sustaining local communities. Kenya's government has also played a part in fostering this engagement, with the development of diaspora-focused policies and initiatives that aim to involve diaspora members in national development processes. The constitution amendments in 2010 allowed Kenyans in the diaspora to participate in voting, signaling a progressive approach towards diaspora involvement. Gitau emphasized the importance of recognizing the critical role that diaspora communities play in advancing the nation's development agenda. She highlighted the need for innovative approaches to harness the potential of diaspora remittances for infrastructure development, job creation, and entrepreneurship. Gitau cited the success of Nigeria and Ethiopia in issuing diaspora bonds, indicating the potential for such financial instruments to mobilize resources for national projects. She also stressed the need for trust between diaspora members and governments, as well as the cooperation of development banks to facilitate continental bonds that support key sectors like healthcare and infrastructure. With the continent facing a substantial infrastructure financing gap, estimated at $120 billion, Gitau emphasized the untapped potential of diaspora remittances in addressing these critical needs. However, amidst mounting public debt challenges, African countries must explore debt restructuring, wise borrowing practices, and diversification of financing sources to alleviate the burden of debt repayment on public service delivery. Gitau urged businesses and investors to capitalize on the growth potential offered by diaspora remittances and human capital, highlighting the expertise and support that diaspora communities can provide to drive economic development in African nations.
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