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Increasing the frequency of inter-governmental engagements through harmonised policies and regional regulations will drive penetration and access to remittances
I recently joined stakeholders from around the world at the UN-led Global Forum for Remittances, Investment and Development (GFRID) held here in Nairobi. The three-day summit was a precursor to the International Day of Family Remittance (IDFR), which was adopted by the UN General Assembly in 2018 and celebrated on 16th June every year. During a panel discussion, I engaged with stakeholders on the adoption of digital remittances and measures that would remove the barriers limiting its uptake, and what changes are needed in the money transfer ecosystem.
Remittance inflows to Kenya have been steadily rising in the past 10 to 15 years. They are the country’s leading source of foreign exchange and rival export earnings from key economic sectors such as tourism, tea, and horticulture. According to data from the World Bank, Kenya’s annual formal remittances amount to almost the same value as all its five neighbours put together — $4 billion compared to $4.9 billion. Latest figures from the Central Bank of Kenya show that diaspora remittances rose by 8.34 percent to $4.027 billion in 2022. This has largely been due to a supportive environment and conducive policies. On average, 60 percent of remittances to Kenya are done through digital channels. However, to fully realise the potential of formal remittances across the continent, there are several key policies and interventions that need to be considered.
Firstly, there is a need to embrace partnerships and foster greater collaboration between different players to achieve wider reach. In 2009, we launched our first remittance solution in partnership with Western Union. It enabled Kenyans living abroad to easily send money home through M-Pesa. One of the greatest impacts M-Pesa has had is significantly lowering the cost of receiving remittances from more than 10 percent of the transaction value to about 3.0 percent currently. As a result, we have achieved the SDG goal of bringing remittance costs down to 3.0 percent more than seven years ahead of the 2030 target. Partnerships are critical also to expanding access and use of remittances as they leverage each player’s strength in the value chain.
As an example, M-Pesa partnered with Visa to make out international payments, which is an area Visa is strong in. Additionally, we have increased the number of remittance partners to more than 25 including other large international players such as Western Union, Google, and PayPal. Increasing the frequency of inter-governmental engagements to promote cross-border remittances through harmonised policies and regional regulations will drive penetration and access to remittances.
Thirdly, a review of the tax regulations with an aim of lowering remittance costs, will drive higher volumes and usage of international remittances. Governments would then benefit from the increased forex flows and increased revenue collections from higher volumes. Finally, governments should explore more favourable entry requirements to attract more remittance operators. More players lead to innovations that address different customer needs therefore reducing the use of informal remittances channels.
Credits: Esther Waititu - Safaricom
The original story was published on Business Daily, 10th July 2023.