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Kenya has recorded the highest growth in diaspora remittances in Africa, helped by the convenience and low cost of its mobile money transfer innovation, latest World Bank report shows.
The report shows that the 10.7 per cent increase in remittances that Kenya recorded when it netted Sh139.9 billion ($1.5 billion) by end of last year, beat South Africa’s growth of 7.1 per cent, Uganda’s 6.8 per cent and Nigeria which has experienced stagnation.
Analysts say Kenya’s vibrant mobile money transfer sector has proved flexible and cheaper compared to traditional brick-and-mortar outlets.
“Mobile money will play a pivotal role in global remittances, helping to reduce fees, improve speed and convenience for users,” says Alix Murphy, senior mobile analyst at WorldRemit – an online money transfer service.
“Most importantly, mobile money is a key enabler of financial inclusion,” he adds.
The World Bank report shows that 90 per cent of money transfers to Kenya on WorldRemit go to M-Pesa mobile wallets.
Safaricom has partnered with Western Union and MoneyGram for international cash transfer services, allowing it to move money into Kenya.
According to GSMA – the global association of telecoms operators–the average cost of sending Sh9,330 ($100) via mobile money is Sh373 ($4) less than half the average cost of sending money globally through traditional money transfer channels.
Global remittances, however, are projected to slow down 0.4 per cent to $586 billion this year on weak growth before picking up next year with the momentum expected to be sustained until it hits $636 billion in 2017.
The high cost of sending money into the country through official channels has in the past been cited as an impediment by the diaspora community.
“The average cost of sending $200 to Sub-Saharan Africa remains at 12 per cent– far off the G20’s target of five per cent– largely due to the cost of bricks-and-mortar agent networks of traditional firms,” says WorldRemit.
The firm adds that the huge costs present a huge market opportunity for mobile money. Commercial banks have been jostling to have a greater share of the remittances which offer cheap source of funds and exchange commissions.
The Central Bank of Kenya hopes that increased competition among financial institutions will result in lower remittance fees. Diaspora remittances have been key in supporting the shilling being Kenya’s fourth largest foreign currency earner.
“2014 saw a steep increase in the number of international remittances via mobile money. The value of mobile money remittances represents a tiny fraction of total flows, but was the fastest growing of all mobile money services in 2014,” says WorldRemit.
– Business Daily