Kenya Banks, telecoms race to tap into lucrative diaspora remittances

 

NAIROBI, KENYA: A rise in the volume of cash remitted by Kenyans working or living abroad has attracted the attention of both local and international banks, mobile phone companies and even cash transfer firms — all keen to get a piece of the pie. Even the monetary authorities have taken note of the dealings, and put in place measures to regulate the business.

Big competitors in the diaspora remittance business include banks, money transfer agencies such as Ria Money Transfer, MoneyGram and Western Union to mobile phone companies and technology firms. Among them are Kenya Commercial Bank - so far with the most varied offering, CIC Insurance, Nation Media Group’s Hela, Safaricom and Chase Bank. Others are Co-operative Bank, Equity and Gulf African Bank and among others. All keen to take their services and products to Kenyans living abroad.

SERVICE PROVIDERS

The latest entrant is ABC Bank, which has introduced a cash transfer service for Kenyans in the diaspora.

“This service gives customers extra convenience as they can make payments directly to suppliers or service providers as well as support their families from anywhere in the world at any time,” said the Bank’s Group Managing Director Shamaz Savani.

Figures indicate that last year, out of an estimated $350 billion (Sh30.8 trillion) remittance worldwide, some $800 million (Sh70.4 billion) was channeled to Kenya, the largest economy in the East African region.

“Most Kenyans in the diaspora have higher incomes by virtue of their responsibilities outside the country. They also have a higher saving affinity since most prefer to invest back home,” Robin Wangome, Ecobank Kenya Remittances and Diaspora Manager told Business Beat.

“Remittances therefore form a good source of deposits and non-funded income and revenue for commercial banks.”

While the main source of diaspora remittances to Kenya is from Europe and the US, Africa is a new frontier - attracting interest from PanAfrican Banks such as West African based Ecobank Group. Using its Rapid-Transfer platform, Ecobank Group is able to channel remittances into Kenya from all the 35 countries in which the bank operates.

“RapidTransfer accounts for 60 per cent of all remittances from these countries to Kenya. The flow comes from businessmen operating in these countries, parents paying school fees and upkeep for their children studying in universities and colleges in Kenya and Kenyans working for various international organisations, especially in West, Central and East Africa,” said Wangome.

RapidTransfer is Ecobank’s proprietary money transfer service. It eases payments within Kenya and across Africa using Ecobank’s extensive branch network. This is supported by Ecobank’s wide footprint across Africa  with over 1,200 branches.  The service is real-time- where funds are sent and received instantly.

It is available to customers and non-customers who want to send money to students, family or pay for goods and services. Customers and non-customers can also transfer up to $10,000 (Sh 880,000) equivalent within Kenya and to 35 countries in Africa where Ecobank has a presence.

SWIFT CODE

For instance, sending the equivalent of Sh10,000 from Burundi to Kenya costs Sh395 while sending Sh50,000 from Burundi to Kenya costs Sh1,265. “We have partnered with The Society for Worldwide Interbank Financial Telecommunication (Swift) to enable customers send cash back home,” said David Wayiera, an officer at Standard Chartered Bank Kenya Ltd (SCB) -consumer banking division.

SCB (K) Ltd has partnered with Swift- which has its headquarters in Belgium and in the world’s major financial centres and developing markets. Almost all the major commercial banks have either partnered with other correspondent banks in Europe, USA and Asia or set up their own infrastructure, to tap into diaspora remittances.

“With a reduction in foreign exchange earnings from traditional exports like coffee and tea, diaspora remittances are now a major contributor to foreign exchange. For commercial banks, the more remittances through their system, the higher their capacity to service import demands of their clients,” Kariithi Murimi, patron of Kenya Institute of Credit Management told Business Beat.

While Kenya Commercial Bank (KCB) has Diaspora Banking- a product targeting East Africans living overseas, other banks have different suites for their clients. For instance, Equity Bank has EquityDirect which allows Kenyans in the UK to send cash back home to any of the bank’s branches.

With Equity bank expanding its network in Europe, Barclays has been encouraging its customers to open US dollar accounts, to enable remittances. During the last quarter, Equity Bank Kenya and VFX Financial PLC in the UK partnered to launch this real-time, cross border, multi-currency money transfer service from the UK to Kenya.

The service enables individuals and corporates in the UK to send money to any account at Equity Bank in the region. A booming diaspora remittance business is also attracting the attention of Kenya’s monetary authorities- Central Bank of Kenya (CBK), which has already put in place the regulatory framework to guide this activity.

Money remittance regulations have already been formulated, creating the necessary legal framework for licensing of stand-alone money remittances providers. A Bank Supervision Annual Report 2013 by CBK calls for the need to reduce barriers and lower cost of sending and receiving money and increasing transparency.

Persons wishing to transact in money remittance business require a minimum core capital of Sh20 million, a security bond of not less than Sh5 million - to be held as security for performance of obligations to customers who deposit money for remittance purposes.

Money remittance providers are also required to maintain a sound information system and adequate records including identification documents used to verify the identity of customers, transaction receipts and source of funds among others. Latest official figures from CBK indicate that volume of cash remitted by Kenyans working or living abroad has dropped in the month of June.

REMITTANCE INFLOWS

Remittances to Kenya increased by 16.3 per cent to $116.1 million in June 2014, compared to $99.8 million in June 2013; but were three per cent lower than receipts in May 2014. This decline reflected in inflows from North America and Europe.

Remittance inflows remained resilient in the twelve months to June 2014, with the cumulative flow having posted an increase of 13.22 per cent to $1,357 million from $1,199 million in the year to June 2013. The 12 month average flow during the same period sustained an upward trend to peak at $113.1 million from an average of $99.9 million (Sh8 billion).

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